Downsizing is when companies terminate multiple employees at the same time, often to save money. As opposed to termination for cause, downsizing is typically not due to any conduct on the part of the employee.
Other words for downsizing include: layoffs/laying off, reduction in force, making redundant.
Downsizing can occur for many possible reasons:
- Corporate downsizing is often the result of poor economic conditions. Typically, the company has to cut jobs in order to lower costs or maintain profitability.
- Downsizing may also occur during a merger between two companies, or an acquisition of the company by another. If the merger or acquisition has not yet happened, a company might downsize to look like a more viable candidate.
- Other times, a company downsizes when a product or service is cut, or the economy falters.
Downsizing also occurs when employers want to “streamline” a company – this refers to corporate restructuring in order to increase profit and maximize efficiency.
What Happens When a Company Downsizes?
Downsizing results in layoffs of employees. Sometimes, these are permanent layoffs; but other times, employees may be rehired after a restructuring period.
Layoffs are often followed by other restructuring changes, such as branch closings, departmental consolidation, and other forms of cutting pay expenses.
In some cases, employees are not fired, but instead become part-time or temporary workers (to trim costs). Sometimes employers offer job sharing for some employees, cut back on employee benefits, or shorten the work week to retain employees.
There are also often changes in the day-to-day work of employees after a company downsizes. Because there are fewer employees, many workers have to take up new responsibilities. There can also be a loss of morale within the company due to the loss of staff.