Top Six Reasons For Downsizing a business

  • July 18, 2016
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Sometimes downsizing your organization is very necessary for a few conditions. However, it is not always a bad thing for your business. In business terms, downsizing often described as ‘trimming the fat’ that means to reduce operating costs and making a company leaner. The downsizing process involves reducing the size of the workforce, plant closures, and making the firm’s departments more productive and efficient. The main reason of downsizing is to restructure an association in order to make it more competitive.

A company simply reduces its workforce in order to cut the operating costs and improve efficiency. When you get involved in the downsizing process, you need to make business decisions that are best for your company and its growth. Let’s have a look at all the reasons that may induce an organization to resort to downsizing.

1. Economic Crisis

The economic crisis is the biggest cause of downsizing a business. The recent economic recession triggered a number of layoffs in many reputed and popular organizations around the world. According to the survey, most companies (big or small) consisting of a higher percentage of staff downsize due to improve the efficiency.

2. Change in Management

The change in company management, such as change in working methods and procedures, can also result in downsizing. Therefore, a significant change in company management directly affect on the employee size, to suit a particular style of working.

3. Excessive workforce

As, we hired excess staff to meet the needs of growing business at the time of higher demand. Similarly, in time of recession, companies downsize the employees when the demand is low or in less growth. In that case, some companies stop hiring new staff and only believe to retain their existing.

4. Merging of companies

That is also a common reason of business downsizing. In order to stay in profit or to expand market reach, some firms/ companies merge its operations with another firm and operates as a single entity. Usually, in such cases, a company cuts staff to eliminate redundancy in work. Therefore, some employees leave the organization voluntarily, or by layoffs.

5. Automation

In this technical world, most of manual work can be done by a machine with much better and cost effective way. That is why, in these organizations, the work process is extremely fast and easily meets the requirements of the market. Hence, it results in the reduction in the number of employees.

6. Outsourcing

Organizations those deals in international markets require a huge and efficient employee base. The labor can be obtained by ‘exporting’ the job to other countries for better working experience and effective business growth.  That is also a big reason of downsize a business.