Downsizing In An Organization Is Also Known As What

Downsizing In An Organization Is Also Known As: A) rehiring. B) adjourning. C) integrating. D) restructuring. E) coordinating.

What Is Downsizing And What Is Its Another Name?

The correct option of this multiple choice question (mcq) is D), as restructuring and downsizing are the strategies implemented to reduce the workforce in the hierarchy or levels of management to cut costs in order to increase profits for the organization and make the future of the business bright i.e., to make the business viable in future for a long period of time. This strategy is adopted by management when cost of production is increased but sales is declined as the numbers of customers who buy products or services are decreasing day by day. So, there is a need to layoff employees and workers from the jobs / works and reduce the operations to cover expenses.

Reasons For Downsizing / Restructuring In An Organization

(i) Changes In Technology

Due to change in IT system i.e., use of advanced IT tools such as AI System, Cloud Computing, Automation, etc., make the work easier and faster and as a result, there is no need of more employees to work so it is time to eliminate some employees to cut expenses.

(ii) Economic Factors

Economy factors such as rise in inflation, lower demand for products or services, depression period of economy, crisis, etc., affect the management to apply downsize the business.

(iii) Achieving Business Goals

For sustainability and viability of the business, the management takes the steps to adopt this strategy of restructuring in the organization to achieve business goals.

When Downsizing Or Restructuring Become Necessary?

When a company is in distress position, there is a depression period of economy, faces decrease in sales due to low demand for its goods or services in the market, inefficient use of resources such as financial resources such as money, assets, etc., are more utilized with maximizing costs and minimum output, then there is a need to reduce some of the operations, reorganized the workforce by removing employees, workers, managers to reduce costs of operations or cost of doing business. New team management, managers of different levels, employees and workers are rearranged or reorganized to increase efficiency and to get the desired results in order to achieve organizational objectives & goals.

Advantages of Downsizing / Restructuring

1. Increase In Efficiency

By lowering expenses, and costs of production and operations, removing staff, the organization can now use its resources more efficiently and effectively as the organization is now able to avoid wastage of its resources.

2. Improvement In Profitability And Liquidity

It increases profitability and liquidity position of the business and the company can meet its obligations and have money to operate the business effectively.

3. Dealing With Updated Changes In The Market

If there is crisis in the market i.e., the downfall of market due to lower demand for specific products & services, then the organization adapts to itself according to the change in the market i.e., downsizing the business operations, cut costs by removing workers and staff in order to cope with the financial problems for the smooth flow of the business.

Disadvantages of Downsizing / Restructuring

1. Loss of High Skillful Workers And Professionals

Due to downsizing, the organization may lose some of valuable and skillful workers and employees. So, always do this strategy carefully as lost of a skillful worker or employee is actually a real damage for the organization as may be such workers or employees can be more productive and effective due to their well performance and will bring the organization out of such crisis situation in the coming years.

1. Discourage And Demoralization of Employees

Downsizing discourages remaining skill and qualified workers and employees. It decreases their morals and they don’t focus on their work fully as now there is a lack of job security prevails in their minds. They think, they will be also removed in near future. So, the management should give them confidence that they will not be remove them as they are the assets of the company and they will be promoted to high position if they work efficiently and effectively.

2. Damaged Company Image

New talented and skillful workers and employees feel hesitate to join such organization where large numbers of workers & employees are layoffs. To rebuild, the management should, honestly, inform about the reasons of such downsizing and their future plans to cope with the situation to stakeholders, both internally and externally, to give them confidence and clear their minds about such downsizing or restructuring in the organization.

The other options A, B, C and E of this mcq are incorrect choices here.

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