Downsizing is to decrease the size of operation with the intent to become more streamlined, by decreasing workforce or by eliminating functions and hierarchical levels, as well as by delayering (Schermerhorn J., et al. 2004, pg 221). Such strategy is used frequently by all organisations from different industries in order to remain competitive. Not only to remain competitive in today's competitive global market but also to survive in the ever-changing environment, such as technological changes. In addition downsizing is often caused by restructuring of company, such as the acquisition and mergers of organisation, increase profit and market stock share and also to avoid bankruptcy (Website: http://pages.infinit.net/rodrigo/downsizing.html, 2004). As well as re-focusing their core business that they had been diversified away from their expansion. Since the most expensive resources for most organisation are human resources, since there is no other way better than downsizing in order to cut cost.
Even though there are consequences to downsizing, in overall it impact on existing employees, such as their morale, commitment and loyalty to the company.
Not only existing employees are affected but employees that are being layoff are affected as well. However, not only employees are affected by the community and organisation too. So the question is why firms still insist in restructuring the company by downsizing. Despite all the consequences that organisation has to face in using downsizing to restructure the organisation, there are invertible benefits. It is also worth using downsizing as a form of strategy in restructuring the organisation if the benefit outweighs the disadvantage. In addition there is ways to minimise these consequences.
Firstly, restructuring is able to increase productivity or firms' performance in order to remain competitive in today's global market. It expected that downsizing should be able to increase productivity by delayering and eliminate unnecessary hierarchical levels.