Effects of Downsizing.

Essay by andy1010University, Master'sB, May 2003

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Downsizing, Layoffs, Cutting the Flab or more rudely put "removing of dead log" are the buzzwords being constantly used in today's business scenario. A national survey done by New York Times states: since 1980, a family member in one-third of all U.S. households has been laid off (New York Times, 1996). But what exactly we mean by "Downsizing". There has been very little research done on this subject (Cameron, 1994, p-183).

Cameron, defines downsizing as a positive and purposive strategy: "a set of organizational activities undertaken on the part of management of an organization and designed to improve organizational efficiency, productivity, and/or competitiveness" (Cameron, 1994:194). Mostly companies used this strategy for cost reductions. Wayyat company survey done between 1985 to 1990, showed that 89% of the total companies which down sized put reduction in costs as their main objective.

Efforts by researchers to bring more accuracy to the term has resulted in the emergence of two definitions, the difference being whether the term is narrowly or broadly defined (DeWitt, 1998).

Companies that follow the narrow definition restrict the term to the planned reduction in company personnel (Allen et al., 1995; Cascio, 1993). From this angle, the term "downsizing" can be viewed as in parallel with layoffs (Hoskisson & Hitt, 1994). The broadly defined perspective views downsizing as a "selective reduction in a firm's use of resources" (DeWitt, 1998: 61). According to this viewpoint, downsizing is a method of restructuring company's resources by retrenchment, downscaling, and down scoping (DeWitt, 1993). Although reduction in personnel is seen as a main part of downsizing, downsizing can include any number of combinations of physical, human, and organizational system reductions (DeWitt, 1998). Due to advances in technology, deregulations of markets, emergence of global economy and availability of contingent workforce,