Downsizing and Lay-offs


Downsizing refers to permanent layoffs or a reduction in workforces. The decade of 1980’s witnessed job losses of approximately 600,000 managers because of −

  • Organizational restructuring
  • Reengineering
  • Delayering
  • Economic downtrends

Sometimes divestitures and mergers also lead to job loss. Generally, companies help the employees to cope up with these involuntary jobs by providing outplacement counseling service. These services include job search training, skills assessment, resume writing, and even salary negotiation services.

The most important thing which mostly companies neglect while downsizing is, lack of clear and frequent interaction with their employees with whom the company wish to work in the future. It is important to give these people timely and precise information related to their ongoing career prospects with leaner organization.

Pitfalls of Lay-offs

Layoffs were used as a way of increasing profits, but downsizing employees alone itself does not yield profit. As per Wayne Casio’s Research, companies which produce new revenue by expanding staff and other assets earn more profit than those who follow the layoff strategy. But, going for temporary workers makes us question what is the best way to manage these employees' career in this 21st century. There are different benefits given by the companies like lower labor costs or increase in staffing flexibility might be tricky if the temporary employees are not skilled enough or are less devoted towards their work.

In addition to this, benefits for skilled individuals like job variety and personal growth might make the company run into losses, if the temporary workers become wandering underclass in the labor pool.

Use of Teams for Work Production

Another important point for the core employees to consider here is, merging workforces leads to more of −

  • Conflicts
  • Social Exclusion and
  • Job Mobility

When people start to work as a team, it becomes difficult to judge an individual's work. When the skills to be used are not defined properly, it becomes difficult for an employee to set personal development objectives for the desired skill acquisition. Researchers Clanni and Wnuck proposed that the solution to this issue is to concentrate on generic-but-important comparative skills that working as a team may provide.

Why do Companies Downsize?

A company opts for downsizing because of competitive pressure, but in the late 1990s this was used as a strategy for all times. During this decade, companies began to cut-down permanent or to say core employees and replace them with temporary or part-time employees.

This was the result of sustained global pressure because of the additional Outsourcing and Off-shoring. Things have changed now, today companies opt for sticking back with their core employees and limiting the recruitment of people for some specific functions only. So, basically it means there are fewer career choices in small companies and inter-company mobility is widely being accepted as a form of career development.