Corporate Downsizing

When companies opt for a downsizing solution, they generally do so because they have decided to cut costs by reducing their workforce (). Labor is often the most significant cost that a company has, and reducing the labor force results in savings not only directly (by eliminating wages and salaries), but also indirectly, by reducing benefits and overhead associated with employees.

There is no specific type of company which downsizes; small companies and large companies both engage in the proactive, as do privately held companies and publicly traded companies. If there is a single commonality which can be found among companies which engage in downsizing, it is a desire to become more competitive in the marketplace (), and to do so by becoming "leaner and meaner." All companies which engage in downsizing do so as part of a cost cutting program. In some cases, the labor reduction is the only step that is taken, but more often, there are other steps which accompany the process.

The immediate effect of downsizing can actually be a boost in the company's financial liabilities. Severance packages, accrued vacation and other related costs must be paid immediately when an employee is terminated. In some cases, employees

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ny, both those who are laid off (since they must find new work and possibly new skills), and those who remain with the organization. Companies are interested in modifying the productivity of those employees whom they retain, but they are also increasingly interested in finding ways to avoid layoffs. Career Objectives Career objectives can change when an individual is laid off; this is particularly true if the downsizing results from the introduction of new technology since the individual's skills may no longer be needed in the marketplace. For example, PBX operators are increasingly being replaced by companies who are installing telephone systems which eliminate their function. Because of this, their skills are no longer applicable in the market and their career objectives are likely to change as a result (Zuckerman, 1996, p. 64). For some employees, downsizing that occurs in their company can have a significant impact on their career objectives even if they are not immediately affected. These employees no longer are confident that they will always have a job since some of their associates are now unemployed, and they may take steps to make themselves more valuable to the organization at which they currently work, and more
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Approximate Word count = 1731
Approximate Pages = 7 (250 words per page)

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