Downsizing usually leads to the loss of the best employees and the demotivation of the second best

The trend today is to downsize. Downsizing is about reducing the number of people on the corporate payroll. Labour cost is not only constant but rises with increases in the general rise in the living standard; and now, with the current pandemic. This can be worrying to many organizations.

Cost saving is perhaps the first reason for downsizing the strength of the staff. The assumption is usually that staff cost is higher than any other budget line and must be reduced. This is partly true in many companies but then what does this say about the organization that downsizes?

Experience has shown that, when an organization downsizes, managers endeavor to overstretch people to keep the level of production constant. In the short run, they are usually successful and the organization tend to feel good about it. But in the long run, the perspective changes. In the long run, maintaining the high levels of efficiency becomes stressful and stretches the individuals concerned till they are burnt out.

It is postulated here that it is the organization that loses through downsizing. Organizations are founded on and are sustained by the intellectual property, skills and energies of their staff. Downsizing will lead to a loss of some of the valuable people. Those that remain, will suffer constant less of commitment due to fear of the future. The decision to downsize is one that must be critically made by any organization putting many things into consideration.

Downsizing is all pain, no gain. While company’s financial situation may be improved in the short run, it is more likely that organisational system is disrupted in the long run.

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