Downsizing

Laying off workers
Right-sizing organizations
Laying off employees
Reducing permanent staff
Cutting back staff

Description

Scaling-down the number of personnel in a company or commercial operation.

Implementation

Downsizing has been a well-accepted and politically-sanctioned measure for economic restructuring during the 1990s. In 1997, the automobile manufacturing company, Renault, announced its plans to close its Vilvoorde plant in Belgium in the interests of reducing its European workforce due to more efficient production. The decision seemed to occur at just the time when the pendulum of political fashion began to swing the other way in Europe. The wisdom of the decision was roundly challenged at all levels, with people demanding new policies or alternative strategies.

Claim

The private sector should handle economic change in a human fashion. If companies cannot generate more jobs internally, or even indirectly through their suppliers, why not work with governments and local authorities to help create jobs in the voluntary sector. Not only would this be socially responsible, it would also make sound economic sense.

Counter-claim

Downsizing might possibly be excusable if it were successful. But a 1992 survey of 1,204 companies showed that this is not the case. Corporate downsizing has a lot in common with dieting: nearly everyone does it, but few get the desired results. Three out of four companies slimmed down their staffs in the last five years, but the majority saw little improvement in either business or productivity.

Scores of large organizations – businesses of all kinds but also government agencies, hospitals and universities – have sharply cut staff these past few years. But few have realized the expected cost savings. In some cases costs have even gone up. In many more, performance has suffered. Creative alternatives to downsizing and right-sizing are available.

Downsizing is a quantitative "solution" without the intended effect of qualitative improvement – in fact, damage to morale and loss of key competencies are very often the result. It does not change the nature of the system, only its size.

Downsizing means job cuts in order to save on substantial labour costs and so become a more competitive company. Yet, the average chief executive in U.S. corporations now makes 149 times the average factory worker's pay. The average pay rise was 30 percent last year for the 23 CEOs whose corporations axed the most U.S. jobs. As in the USA, this appalling trend recurs in other countries too. For those workers laid off, it only adds tremendous insult to injury. Whilst downsizing may be necessary, such "double-standard downsizing" must be fought against and must be denied. Top-executives should not be offered or should accept pay rises, and better still should opt for pay cuts, during a downsizing phase of the company concerned. This action would certainly send the right message to the (remaining) workforce. Corporate executives' wider responsibilities must not be permitted to be blinded by greed. They should not be able to walk away from the substantial problems that their decisions create for society just like that.

A significant proportion of those losing jobs through downsizing suffer wage cuts when they find new employment. In the USA it was 10 percent through the 1980s in the USA.