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    Reasons of Downsize: Benefits

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    Asaf Alfred
    Downsizing is often done to reduce costs and increase efficiency, but it can actually increase the risk of bankruptcy. The main reasons for downsizing are economic crises, changes in management like new procedures, and outsourcing jobs overseas. However, downsizing also has negative effects like losing valuable knowledge from experienced employees, damaging trust between remaining employees and management, and potential legal issues if layoffs were discriminatory.

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    Reasons of Downsize: Benefits

    Uploaded by

    Asaf Alfred
    92 views2 pages
    Downsizing is often done to reduce costs and increase efficiency, but it can actually increase the risk of bankruptcy. The main reasons for downsizing are economic crises, changes in management like new procedures, and outsourcing jobs overseas. However, downsizing also has negative effects like losing valuable knowledge from experienced employees, damaging trust between remaining employees and management, and potential legal issues if layoffs were discriminatory.

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    Reasons for downsize of a business

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    downsizing

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    Downsizing is often done to reduce costs and increase efficiency, but it can actually increase the risk of bankruptcy. The main reasons for downsizing are economic crises, changes in management like new procedures, and outsourcing jobs overseas. However, downsizing also has negative effects like losing valuable knowledge from experienced employees, damaging trust between remaining employees and management, and potential legal issues if layoffs were discriminatory.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    92 views2 pages

    Reasons of Downsize: Benefits

    Uploaded by

    Asaf Alfred
    Downsizing is often done to reduce costs and increase efficiency, but it can actually increase the risk of bankruptcy. The main reasons for downsizing are economic crises, changes in management like new procedures, and outsourcing jobs overseas. However, downsizing also has negative effects like losing valuable knowledge from experienced employees, damaging trust between remaining employees and management, and potential legal issues if layoffs were discriminatory.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Reasons of downsize

    Benefits: Firms often downsize because it is seen as a way to reduce costs, adjust


    structures, and create better, more efficient workplaces. But new research indicates
    that downsizing may actually increase the likelihood of bankruptcy.

    Economic Crisis

    The economic crisis is the biggest cause of downsizing a business. The recent economic recession
    triggered a number of layoffs in many reputed and popular organizations around the world.
    According to the survey, most companies (big or small) consisting of a higher percentage of staff
    downsize due to improve the efficiency.

    Change in Management

    The change in company management, such as change in working methods and procedures, can also
    result in downsizing. Therefore, a significant change in company management directly affect on the
    employee size, to suit a particular style of working.

    Outsourcing

    Organizations those deals in international markets require a huge and efficient employee base. The
    labor can be obtained by ‘exporting’ the job to other countries for better working experience and
    effective business growth.  That is also a big reason of downsize a business.

    Effects of downsizing

    Loss of Knowledge and Experience

    Companies invest a lot of time and resources into hiring and training employees. In
    theory, every employee should have the essential skills and knowledge base required to
    complete their job functions. Also, the longer an employee is with a company, the more
    information and skills they can acquire. Therefore, when employees are laid off during
    the downsizing process, the company loses more than just a warm body; they lose the
    employee’s knowledge, experience, and expertise. In addition, downsizing companies
    typically do not hire new employees, which means there will be a void instead of a
    replacement.
    Loss of Trust and Security

    Layoffs tend to put people on edge. For obvious reasons, terminated employees are
    feeling a sense of insecurity as they are being forced to leave the company and find
    other work. The remaining employees may also struggle with downsizing. Even if their
    job has not been cut, knowing that their company is willing to lay off employees to cut
    costs can be an unsettling realization. Although the remaining employees may be
    relieved to be spared from termination, there is oftentimes a loss of trust with
    management and a loss of comfort in job security.

    Legal Issues

    If employees that were laid off feel as though they were laid off due to discriminatory
    reasons, they may have grounds for a lawsuit. Legal consequences are not guaranteed
    in all downsizing situations; however, they are a definite possibility.

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