Downsizing is job cuts amid globalization of world markets, increased competition in international markets, and the emergence of cheap labor. Closure refers to the elimination of redundant jobs, optimization of the size of the company, and the transformation of work processes. It includes components such as a layoff strategy, a measure to reduce managerial levels, and a change in logistics and marketing methods. With this approach, the hierarchical structure of the company is retained, but the key to using downsizing is assigned to the direction of job cuts.
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One needs to be aware of the legal aspects of downsizing due to high levels of conflict attributed to the process. It is stated a manager is obliged to provide advance notice, and it is critical to be prepared for lawsuits (Berman, 2020). Therefore, an employer must consider the overall impact of the decision on employees in order to preserve reputation and retain the strategy (Cranfield School of Management, 2011). In addition, managers need to understand that both external and internal communication is essential for conducting proper downsizing (Cranfield School of Management, 2011). Such a company must inform the public and its internal people, such as employees and suppliers, regarding the reasons and action steps.
The use of downsizing leads to a conflict of interest among social groups that affect the success of a business. By introducing downsizing, the company’s management will show interest in shareholders and management, and ordinary employees only feel negative changes. The resulting competition between staff for jobs only reduces the competitiveness of the company. In this regard, the importance of social policy pursued by local authorities and the state in relation to workers who are affected by the negative aspects of downsizing is growing. Although the closure is only a means, and sometimes the natural result of transformation, restructuring, and property reform in the form of an enterprise, this process should not be an end in itself under any circumstances.
Therefore, the next stage is the proper use of social media tools in order to bring transparency and openness to the process. If a company dismisses and ignores social media, other people will use them in order to damage the reputation and brand image (Cranfield School of Management, 2011). The given step is followed by the actual project management task of downsizing, which needs to be conducted according to the plan (Cranfield School of Management, 2011). Layoffs can be perceived as a heavy toll by employees, who remained at the company. It is stated that both managers and employees can adopt a crisis mentality after the process, which can be partially mitigated by training survivors and introducing human resource policies (Gandolfi & Hansson, 2015). The overall purpose of downsizing can be either efficiency increase or business downturn adjustment. However, the study suggests that the former goal is not supported by evidence, because there is no significant increase in efficiency after downsizing, and it might even drop during the process (Goesaert et al., 2015). Therefore, one needs to be aware of the potential ramifications of using such an approach.
In conclusion, downsizing is a highly intricate process, which needs to be conducted correctly in order to minimize the damage. An organization should use it only during downturns, and it should be done in five steps. Employers need to consider the impact, establish communication channels, use social media, properly conduct actual closure, and manage continuity. The application of the concepts of reengineering and downsizing occurs mainly at the stage of the decline in the life cycle. It is one of the ways to transform the enterprise and bring it into a state that meets the requirements of the market, which might increase the efficiency of functioning at the micro-level.
Berman, C. (2020). Summarizing the basic legal issues involved in layoffs. Chron.
Cranfield School of Management. (2011). Downsizing: Key considerations [Video]. YouTube.
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Gandolfi, F., & Hansson, M. (2015). A global perspective on the non-financial consequences of downsizing. Review of International Comparative Management, 16(2), 185-204.
Goesaert, T., Heinz, M., & Vanormelingen, S. (2015). Downsizing and firm performance: Evidence from German firm data. Industrial and Corporate Change, 24(6), 1443-1472.