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What is downsizing ?

Downsizing is the term used to refer to the overall reduction of operating costs in a particular company, usually by trimming down the number of employees. Downsizing usually occurs when the market is tight since companies try to survive and compete with other companies within their industry.

Companies practice downsizing because of several reasons, the most common being “to make daily operations well-organized”.  Some companies practice downsizing when they replace people with computers or machines, making production quicker and reduce human-made errors. Aside from this, the company also saves money by spending a one-time deal for the machines and avoids overhead expenses for many years to come. On the other hand, some companies close down one division when the big bosses feel the department isn’t bringing in revenues. Some businesses just literally have too many employees due to a sudden decrease in demand on services or redundant divisions.

Many companies hire consulting firms to assist them during a downsizing process by evaluating their business objectively. Since profit remains the main goal of all businesses, employees know that this scenario may occur, particular in companies that are just starting out or those that are part of an unstable market.

Employees are the most affected in downsizing, so it’s understandable that they feel threatened of such process because downsizing would mean they may or may not continue their employment within their present company. The process of downsizing can be very abrupt or slow, depending on the status of a company.

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