Question

Discuss the short-term and long-term implications of downsizing. What does the research say?

Answer 1

Downsizing means reducing the numbers. Generally it is done in the number of staffs a company has. It could be done keeping in mind the short terms or long term objective. For short term downsizing the reason could broadly be the lack of revenue to support the staff. There might be cash crunch or there might not be sufficient work because of which staff are removed from the work. But when work comes up again people are recruited. This will affect the work in terms of retaining talented pool of manpower or there might be a delay due to shortage of manpower.

Long term downsizing is done keeping in view the future benefit the company will get from the resource. It is done over a period of time. Suppose a new technology is being implemented that will reduce the manpower requirement then the staff are gradually removed. There is no mass termination. Rather the recruitment stops and the work is done with the existing manpower. To keep the existing manpower motivated they are provided some additional perks till the technology is implemented.

Downsizing is a strategic decision that involves input from the top management and the process how to do it.