Downsizing Solutions

However, despite short-term cash demands, downsizing can reduce the company's costs within the long term, which is why it is a popular price reduction procedure (Miller, 1996, p. 4).

Another financial effect of downsizing is that it can have a very good effect on the company's stock, a important point if the business is publicly held. Companies that are noticed as taking proactive measures to control their costs, which downsizing represents, can receive a bounce in their stock price after announcing a layoff. This factor can influence the choice to lay off employees if management wants the industry to perceive that it is aggressively meeting its corporate obligations (Stovall, 1996, p. 34).

There are choices to layoffs which can bring about highly effective cost cutting without the need of providing the business from the severe final results that layoffs bring. Some companies, for example, have enacted across the board pay cuts until the company has sufficiently regained its profitability. Other businesses have put workers on flex-time or reduced schedules so that they retain their jobs, but the business is not responsible for rewards or other costs. The result the following is that the workers are accessible once the business returns to greater profitability.

Some of the final results of downsizing is also mitigated by the business taking pains to explain their actions to employees. This communication must involve all of the cost cutting measures that are getting implemented, not only the layoffs. In cases exactly where the downsizing could be the result of restructuring (such like a division getting closed), the layoffs can also be viewed as inevitable plus a sound company decision (although the underlying restructuring might be questioned). If management takes the time and care to address the concerns of employees, it can help build up morale much more effortlessly than if it ignores the valid concerns of its workforce (Dentzer, 1996, p. 58).

Employees who witness downsizing activities at their firms are not likely to desire to remain from the business which participates inside the downsizing. The longevity of employees after a downsizing move depends on several factors, however. Chief among these could be the individual employee as well as the skills and talents possessed by that employee. Some employees will likely be eminently employable and will have tiny difficulty finding other jobs; other employees have either very specialized skills which are not in much demand in the market, or skills which do not transfer well to other companies. These employees are most likely to remain with the organization, and may perhaps even be key achievement causes from the long-term (Heller, 1996, p. 23).

The most immediate effect of downsizing is on the employees at the company, both people who are laid off (since they must discover new work and possibly new skills), and those who remain in the organization. Corporations are interested in modifying the productivity of those people employees whom they retain, but they're also increasingly interested in finding methods to avoid layoffs.

Heller, R. (1996, March). Downsizing's other down side. Management Today, p. 23.

Retaining employees who have skills which no longer match individuals required by an corporation does not make sense.

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