Downsizing can be the result of slack demand for an organization's goods or services, the upshot of a merger or acquisition, outsourcing, relocation of operations to another region, technological innovation, unacceptably high costs of factors of production (including raw materials, capital equipment, labor, technological infrastructure, and legal compliance, e.g., employee healthcare, tax burdens and other operating costs, such as rent).
Job market survival skills should include the ability to read and note the signs of impending full-blown downsizing and taking precautionary steps to minimize its impact, e.g., initiating a job search, increasing personal savings, being very cautious in taking on new financial obligations, e.g., having a child.
Typically, in aiming at reducing costs, increasing productivity, and restructuring work processes, downsizing is given as positive a spin as possible, e.g., as a step to make the organization "lean and mean" or "re-position the organization in a competitive market" through a (sometimes well-intentioned) process of "creative destruction".
When Charles Handy introduced the term "downsizing" in the 1970's, the corporate job cuts it designates were seen as likely to be driven by technological advances that make employees redundant or sufficiently inefficient to let them go. As a workforce reduction strategy, downsizing concentrates on the reduction of the overall number of employees through layoffs, retrenchments, natural attritions, early retirements, hiring freezes, golden parachutes, and buyout packages.
Over the decades since then, outsourcing and recessionary pressures have joined technology as downsizing drivers, while the "lean and mean" mantra has become more entrenched. Downsizing is often the outcome of organizational reorientation accompanied by the three Rs-reduction, restructuring and reorganizing.
Downsizing takes two time-dependent forms-reactive and proactive, and can occur in response to either micro-economic or macro-economic conditions, e.g., a huge increase in office rent or a depreciating currency. In one of its worst micro-economic forms, it can happen just because of a new senior-level appointment and a desire on the part of a new administrator to "clean house" for its own sake.
Laying off staff is not the only way to downsize employee numbers. Other downsizing techniques include organization redesign-a strategy that focuses on eliminating work by abolishing functions, eliminating hierarchical levels, redesigning tasks, and consolidating units.
Apart from the purely economic and financial pain inflicted on downsized staff, there are psychological-including emotional-issues to be addressed, e.g., shock, a sense of betrayal, a damaged sense of loyalty and deep foreboding regarding personal career futures. To cushion these blows, organizations should consider taking a number of steps, including providing downsizing counseling for terminated staff.
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