Downsizing, �a systematic reduction of a workforce by an employer� (pages.infinit.net/Rodrigo/downsizing.html), is a popular practice in large firms these days, and for good reason. Downsizing can reduce the company�s expenses, increase productivity, free up workers for other industries, speed up the corporate decision making process, raise stock prices, and lower unemployment percentages. For these reasons, companies greatly benefit when they choose to downsize.
Downsizing can take many forms. When companies merge together, oftentimes there are many jobs that overlap. In these cases it would be silly to keep two people performing the same tasks, so companies eliminate one of the positions. This enables the company to work more efficiently to achieve the company�s desired results. When organizations are considering filing for bankruptcy, downsizing is often an alternative in order to save money immediately. In addition, downsizing is often used by companies in order to compete with the cheaper labor that South America and Asia can provide by keeping costs to a minimum (pages.infinit.net/Rodrigo/downsizing.html).
The benefits of downsizing are numerous. The most obvious benefit is the reduction of expenses that comes after layoffs are made. A survey conducted by the Wall Street Journal found that after downsizing, 46% of the firms interviewed reported reduced expenses (pages.infinit.net/Rodrigo/downsizing.html).
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Downsizing is framed within the context of removing or taking out employees witch are of much use to the company's work process, or their performance is not adequate. It is almost like upgrading your old pc, and taking out the old and obsolete parts. Many successful companies nowadays engage in downsizing as a purposeful and proactive strategy. Interestingly though, some studies have shown that ...
It also means lower prices on products for consumers. For instance, General Motors is known for having a very strong loyalty to its employees, therefore layoffs in the organization are rare. The result is that GM has to charge $2000 more for its cars than companies like Ford and Chrysler. If GM would shut down one of its plants, for example its brake parts plant, and buy the brakes from another company, GM could significantly cut its costs (www.startribune.com).
As this case indicates, downsizing reduces the company�s costs, which is good for the company as well as the consumer. In addition, the day after downsizing plans are announced, most firms� stock prices rise. For example, IBM�s stock rose 7.7% as a result of announcing its downsizing plans (pages.infinit.net/Rodrigo/downsizing.html).
This is definitely a benefit for the company.
Downsizing also increases a company�s productivity. Computers have aided this increase tremendously. For example, in 1970 the telephone industry needed 421,000 switchboard operators to aid Americans in making 9.9 billion long-distance calls. In 1994, new technology made it possible for only 176,000 operators to handle 83.4 billion calls. �Without the boost in efficiency, today�s volume of long-distance traffic would require 3.6 million operators� and we would pay six times as much for our long-distance telephone calls� (www.ncpa.org/bg/bg146/bg146a.html).
Clearly the downsizing of the telephone industry has increased productivity, as well as cut costs to the consumer.
Another benefit of downsizing is that it frees up employees to work in other areas. The agriculture industry is a prime example. In 1900 it took 95 out of every 100 people to feed the country. Today it takes only 3 due to advances in technology (www.ncpa.org/bg/bg146/bg146a.html).
If downsizing in the agriculture industry hadn�t occurred, everyone would still be producing food, rather than working in other areas such as technology and education, which help further a society. This benefit is connected to another benefit, which is that downsizing allows for new jobs to be created. New job creation is essential to advance technology and the economy. The European Community exemplifies this benefit. In Europe there are restrictions on the power of employers to layoff employees, which has resulted in few new job openings. Compared to the 15 million new jobs created in the US, the European Community has added only 3 million. As a result, unemployment in the EC is around 10%, whereas in the US it is around 6% (www.ncpa.org/bg/bg146/bg146a.html).
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Moulinex, the French-based electrical household appliance manufacturer, started in the early 1900's with Jean Mantelet and a few employees who made hand-held mashed potato grinders. With limited technology at the time, the company eventually became very innovative. They began to distribute their grinders all across France and neighboring countries. Their reputation for quality lead to the company ...
Downsizing is necessary for technological and economic advancement.
Downsizing, especially downsizing management, speeds up communications and decision making in the organization. When there are many different people making a decision, it takes much longer to come to an agreement than with a smaller group. �The group should be large enough that members possess the collective knowledge to resolve the problem, yet small enough that the team doesn�t consume too much time�� (McShane 349).
Downsizing can help the organization to realize its optimal size.
In conclusion, downsizing has been going on for centuries, and is often necessary for growth. Companies site reduced expenses, increased productivity, rises in stock prices, and speed in decision making following downsizing. Downsizing also allows for new jobs to be created in addition to freeing up employees to work elsewhere that needs them. This new job creation results in lower unemployment. Clearly downsizing is necessary and beneficial for the firm and the employee.
Works Cited
1. Cox, W. Michael. �The Economy�s Good News: The Upside of Downsizing.� Online. National Center for Policy Analysis. Feb 28, 1998. Last Visited April 7, 2002. URL: www.ncpa.org/bg/bg146/bg146a.html
2. Frahme, Carl. �Downsizing- Good, Bad, or Both?� Online. Frahme Consulting Services. Last Visited April 7, 2002. URL: www.frahme.com/downsizing.htm
3. Maitland, Ian. �The Upside of Downsizing.� Online. The Star Tribune. Last Visited April 8, 2002. URL: www.startribune.com/stonline/html/special/leaky/mait07.htm
4. McShane, Steven L, Mary Ann Von Gilnow. Organizational Behavior. Boston: Irwin McGraw-Hill, 2000.
5. Padilla, Rodrigo. �Literature Review on Corporate Downsizing.� Online. Last Visited April 7, 2002. URL: pages.infinit.net/Rodrigo/downsizing.html
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We are rapidly constructing a broad network infrastructure for moving information across national boundaries through internet, but there is much to be done before linguistic barriers can be surmounted as effectively with cross language translation web based online dictionary. Users seeking information from a digital library could benefit from the ability to query large collections once with a ...
