The Evidence of Downsize

The evidence of downsize?

“The evidence indicates that downsizing is guaranteed to accomplish only one thing — it makes organizations smaller” (Pfeffer, 1998). In fact, the consequences of downsizing is stock prices that lag 5 to 45% behind the competition (in more than 1/2 the cases they lagged 17 to 48%), it does not necessarily increase productivity or profits, downsizing tends to be repetitive (2/3 of organizations repeat it the next year), it does not fix or improve core processes, it can be readily copied so it offers no competitive advantage, and it has unanticipated costs that limit its benefits.

Downsizing only works about 1/2 the time, thus firms are basically flipping a coin when they choose to downsize. With all the negative connotations associated with downsizing, very few firms use other means to avoid downsizing (1994 American Management Association survey). Downsizing is nothing more than a euphemism that refers to layoffs initiated by a company in order to cut labor costs. While the euphemism makes it less disturbing for the speaker to say it, it probably does nothing for the listeners.

Rather than downsizing, other possibilities include:

o reducing work hours

o reducing pay

o taking outsourced work back

o building inventories

o freeze hiring and reshuffle workers

o do training, maintenance, etc.

o refrain from hiring during peak demands

o encourage people to innovate (product, services, markets)

o transfer people to sales to build demand.