Downsizing means that there is a calibrated effort by the organization for improving the performance (Cascio, 1993). Downsizing is treated as a way in which the costs of the organization is reduced, however studies have noted that even the companies that are growing in the business can downsize (Cameron, 1994a). The studies from Luthans & Sommer (1999) argues that both internal and external environment is responsible for downsizing in the organization. The internal pressure can be failure to innovate and remain competitive in the business and the external environment refers to the competitor’s policies and strategies.
Downsizing also creates problems for the organizations. The general idea is the reduction of costs while in many cases it has been noted that the actual expenses of the organization increases after downsizing (Morris et al.,1995). The other problem that is witnessed in the downsizing is the decline in the motivation levels of the employees. These include both outgoing and working employees. It has been noted that the downsizing results in the creation of scepticism among the employees in regards to the safety and security of the job. The problems of affect on the creativity of the existing employees are also noted after the downsizing.
Downsizing efforts should be well regulated and planned. Bruton et al., (1996) downsizing reduced the market capitalization of the companies. The downsizing efforts fail primarily because after effects of it is huge. The firm looses productivity, while they do not want to change from primitive techniques of commanding the employees, controlling them and compartmentalizing them. The failure in the downsize is because of the fact that most of the firms are not at all prepared to face the challenges of the downsizing. Lack of innovation and the morale of the employees are to be dealt with proper plan, however, the motive of the organization remains stuck to controlling the costs (Freeman, 1994).
The organization planning to downsize must first study the approaches that are ideal for the business. When realignment is the purpose of the organization, it should adopt the reorientation approach. The reorientation is done by reorganizing the firms plans and approaches and checks whether the same is in line with the strategies organization is trying to adopt. The mission of the company is revisited and changed. It is critical to note that implementation of this strategy must be communicated in the proper manner. The employees should be taken in loop and measures like the inspiration by leaders, motivating speeches and rewards must be given. If the downsizing is done in a particular department it is essential that the co-ordination of other departments is there. The recent example of Microsoft can be taken where the company is laying off 14 percent of its employees, 18000 in number (Reeves, 2014). The company said that the restructuring policy was made in order to create One Microsoft (Warren, 2013). The other policy that organizations adopt is the convergence, which means that the improvement is to be made on a constant basis. The employees and the managers of the organization are made to think on how can the company improve in the existing business and its expertise.
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