Explain downsizing, both in terms of what it is and why it happens. Discuss the best approaches to downsizing, including the concept of rightsizing.

Question

What will be an ideal response?

Answer 1

Answer: Downsizing is the planned elimination of positions or jobs. Common approaches to downsizing include eliminating functions, hierarchical levels, or even whole units. Another option is to replace full-time employees with less expensive part-time or temporary workers. Managers usually opt for downsizing only in response to some kind of pressure. Traditionally, companies have downsized when product demand falls and seems unlikely to rebound in the short run. Laying off workers is a way to avoid paying people who are not needed to produce goods or services and to reduce costs so that the company remains profitable—or at least viable—until the next upturn in business. Done appropriately, with inefficient layers eliminated and resources focused more on adding customer value than on wasteful internal processes, downsizing can indeed lead to a more agile firm. In that case, downsizing can be called rightsizing—achieving the size at which the company performs most effectively.