The Pros and Cons of Corporate Downsizing

1252 Words6 Pages

I. An introduction to corporate downsizing.

II. The reasons behind a company downsizing.

A. Cash flow, profits, and profit margins.

B. Organizational structure and procedures.

III. Planning the downsizing.

A. Pro and con factors.

B. Identifying the options.

IV. Implementing the downsizing.

A. Announcing the action.

B. Communicate.

C. Staff Stability.

V. Conclusion

Corporate Downsizing: A Profitable Benefit Or An Unprofitable Disaster

The unemployment level is at an all-time low. The economy is strong. The stock market is breaking new records. Investors are buying stocks by the handful. Corporations are making extremely high profits. So, why is it that corporations are laying-off and firing people by the hundreds? The reason is corporate downsizing. The main objective of a corporation is to be profitable and survive in the ever changing times and economy. Corporate downsizing plays a big role in the profitability and survival techniques of a company.

There are many reasons why a company would downsize. Management makes a decision to reduce the entire workforce in order to cause a buying frenzy with investors, which results in more capital for the company. It also creates more compensation for management when the company gains more equity. When companies merge together, many times they do not need the vast majority of workers from the merging companies to perform the jobs. Therefore, they would implement a downsizing. Un-collectable accounts will cause a lack of cash flow. A company always needs some form of cash flow in order to pay bills and make payroll. The lack of it could cause downsizing because of payroll issues. Technology is always changing, and some companies do not have the time or money to update their equipment. This will result in losing some customers, and without customers there is no inflow of money. Also with the changing technology comes more competition. Many new companies are trying to break into the business barriers. A lot of these factors affect the company’s profits and profit margins.

One of the biggest reasons to downsize is a change in organizational structure or procedures. This can come internally from the company or it can come from mergers and buyouts. While many factors greatly influence downsizing at a gr...

... middle of paper ...

...r new jobs and the lack of people to perform other jobs. Looking to the future needs to be continually stressed.

Usually when a company downsizes, the results end up exactly the opposite of what they wanted, and it is usually because of the lack of planning. There are many issues involved in a corporate downsizing and with appropriate planning these issues can usually be resolved. While employees terminated usually get all the downfalls of a downsizing, the corporation had to downsize for a reason. This reason most often leaves the corporation with a better ground to stand on.

Works Cited

AMA Survey: Corporate Job Creation, Job Elimination, and Downsizing. AMA:Library,


Candell, and Matthew B. Krepps. Industrial Inefficiency and Downsizing: A Study of

Layoff and Plant Closures. New York and London: Garland Publishing, Inc., 1997.

Geneen, and Brent Bowers. The Synergy Myth and Other Ailments of Business Today.

New York: St. Martin’s Press, 1997.

Rudolph, Barbara. Disconnected. The Free Press, 1998.

Tylzak, Lynn. Downsizing Without Disaster: A Thoughtful Approach to Planned

Workforce Reduction. Los Altos, California: Crisp Publications, Inc., 1991.

More about The Pros and Cons of Corporate Downsizing

Open Document