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Organizational downsizing is a strategy used by companies to reduce costs and resources due to declining profits, restructuring, or changes in business operations. It often involves layoffs, wage reductions, and loss of benefits, but can lead to increased efficiency and a clearer vision for the future. Downsizing can be caused by various factors, including declining profits, mergers, and restructuring plans. Proper preparation and assistance can help ease the transition for affected employees. Downsizing can also involve reducing workplace resources and services.
Organizational downsizing is a move by a company to reduce costs and resource use due to declining profits, corporate structure reorganization, or a change in business operations. The downside of organizational downsizing is that it often relies on worker layoffs, wage and bonus reductions, and loss of services and benefits for the remaining workers. Done correctly, however, organizational downsizing can lead to a revitalization of efficiency and a clarified vision and set of values for the future.
There are many reasons why a business may decide to downsize its workforce or resources. One of the main reasons is a drop in profits, sales, or a macroeconomic shift leading to falling business. To survive in the long run, a company may need to downsize to stay afloat in a declining market. Merging with another company can also result in downsizing, as both companies may have redundant jobs and even departments that will require layoffs and reductions in the new corporate make-up. Sometimes, a company will also embark on an organizational downsizing program as part of a restructuring plan to increase efficiency, reduce costs, and commit to a new organizational strategy.
When an organization announces a downsizing plan, the workplace can develop a very different vibe overnight. People may rightly fear for the future of their jobs and in such circumstances competitive behavior and even sabotage is not unheard of. Workers may feel betrayed by their managers and resent the high wages and benefits that go to the top companies while low-end workers are fired. However, downsizing can also be an opportunity for managers and workers to bond, forming a strong commitment to each other in an effort to keep as many jobs as possible.
Some business experts suggest that companies can go a long way in easing transitions caused by organizational downsizing through proper preparation. Offering severance packages, early retirement incentives, and job retraining programs can help laid-off employees leave with some means of assistance. Companies can also help by creating programs to assist former employees with tax and insurance issues caused by job loss. It can also help ensure that scaling is company-wide, rather than focused on a specific department or occupational level; if the goal of scaling is to eliminate inefficiency and waste, that goal might be better achieved by applying standards to all levels of occupancy.
Organizational downsizing can also involve shrinking workplace resources, as well as people. This may mean reducing employee services and programs, such as gym memberships, company cars and cafeteria services. Employee services, such as health clinics, seminars and educational assistance, may also be cut. Economics across the business can help reduce waste, but at the same time potentially allow for the retention of more jobs.
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