Category: 

What is Corporate Downsizing?

Corporate downsizing refers to a organizational restructuring that leads to layoffs.
Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 July 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
In the US, workers under 25 have unemployment rates that are twice the national average.  more...

July 28 ,  1945 :  14 people were killed when a US Army bomber crashed into the Empire State building.  more...

Corporate downsizing is the process of reorganizing a company structure in a manner that brings about layoffs of a portion of the company’s work force. The actual downsizing may be an attempt to keep the company profitable when demand for the business’s products or services declines, the elimination of a division or subsidiary that is considered outmoded and not in line with new company goals, or the result of a merger with another company. In any event, the workforce reduction will mean the loss of jobs for employees ranging from executives to hourly workers.

One of the more common reasons for corporate downsizing is a decrease in the demand for a company’s goods and services. This decrease may be due to competitors gaining a larger share of the available consumer market, or economic downturns that cause consumers to focus more on necessities and less on any luxury items. In both situations, the lack of demand means that the corporation can no longer continue to operate with the same level of expenses and remain solvent. Thus, the company is likely to limit or shut down some portion of the manufacturing facilities in order to adjust to market demands. This usually means that hourly employees and managers will be laid off for an undetermined amount of time or let go completely.

Ad

When corporate downsizing is due to corporate mergers, there is usually the need to streamline the operations of the company in order to prevent duplication of effort. Often, a merger will mean that at least some of the executives are likely to be laid off or let go as various upper level operations are combined. A merger can also often lead to closing some physical plants and other facilities where both entities formerly operated. In turn, this means a reduction on the number of line employees, shift managers, and plant directors as two or more operations are restructured to operate out of one facility.

While corporate downsizing is usually viewed as a negative situation, that is not always the case. Severance packages sometimes take some of the sting of a layoff out of the picture. Many companies who go through a downsizing process make efforts to fund job retraining programs for their former employees, while others actively seek to identify other employers who would be interested in hiring some of the laid-off work force. People who have been laid off due to corporate downsizing sometimes use the event as a springboard into an entirely new career or line of work, one that ultimately proves to be more personally fulfilling as well as more lucrative.

Ad

Discuss this Article

anon116151
Post 2

@indika: I.B.M., A.T.&T., Compac, Hewlett Packart, Proctor& Gamble, General Motors.

indika
Post 1

What are the famous companies in the world that has done the corporate downsizing?

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email