RESTRUCTURING & DOWNSIZING
PART 3 of 9
DOWNSIZING
In an ideal world businesses would continue to grow and create shareholder value. However, in the limited resource world we live in, companies rise and fall. Some giants fall due to poor management decisions, as with recent downsizing within the motor industry, or due to uncontrollable social and environmental disasters.
Companies downsize to cut cost, improve efficiency and to maintain a profit level acceptable to their shareholders. Downsizing is the deliberate decision to reduce the work force that is needed to run the current size of the business. Layoffs are a part of a larger plan, where organizations analyze their core business and develop their business to its fullest extent.
There are two types of downsizing.
Proactive is a restructuring strategy of an organization to obtain efficiency and market share.
Reactive, where the downsizing occurs because of deep financial trouble within the organization.
Downsizing occurs because of an intentional decision to reduce personnel. Commonly disproportionately in the management ranks, reestablishing efficiency and/or effectiveness objectives. The main theme of downsizing is to lower operating expenses by employee elimination to show a greater profit for the company.
The organization’s prerequisite to downsizing is attributed to cost efficiency, greater control and to develop a company that is able to react to a changing market within a short period of time.
Comments
Posted by: Sandy Piderit
Posted on: March 31, 2006 06:38 AM
hi Mateusz,
something isn't working right, because this entry is blank...