Downsizing is one of the methods of staffing adopted by organizations all over the world. The concept of downsizing has been given a number of names to make it sound a bit soft, these include terms like workforce optimization, workforce reduction, redeployment, smart sizing, right sizing and simplification. Other alternatives that can be employed instead of downsizing include; hiring workers basing on the vision, cross training, succession planning, redeployment within the organization, creating a comprehensive model, reduced hours of work, lower wages, attrition and alternative placement. The concept of downsizing has been understood and defined in a number of ways some of which are listed below.
Downsizing can be defined as the cautious use of permanent personnel reductions in an attempt to improve efficiency and effectiveness. It can also simply be defined as the planned elimination of positions or jobs. Bruce Weinstein defined downsizing as a company’s decision to reduce its workforce for reasons other than poor performance, criminal conduct or unwanted behavior on the part of those being let go.
The origins of downsizing can be traced back to the 1980s and 1990s. It began as a strategy by sickly and collapsing corporations shedding workers in the face of weak demand, but was soon adopted even by strong firms looking to boost shareholders’ value even further. It was mainly used by CEOs as a solution to boost accounting profitability. This was because cutting labor was viewed as a necessary and relatively painless method to boost profit margins.
In its early stages, downsizing was mainly a result of the increased use of machinery in the 1990s and 1980s. This had increased workers’ productivity and therefore reduced the amount of workers necessary for a given level of profit. As a result, there was reduced need for workers. Among the first companies to downsize was GE in 1980s when it released 104,000 of its 402,000 workers in a move to stay competitive.