Corporate downsizing has been the forerunner to the loss of millions of jobs. While corporate downsizing is an indication of recession, employers are laying off more and more in spite of the fact that overall unemployment is at an historical low. Although downsizing is typically the last sought alternative for companies, it can occur for several reasons. Research illustrates that downsizing commonly transpires because of mergers, acquisitions, corporate restructuring, lack of strategic planning, and a decline in economic growth. The cut back in job occupancy produces adverse reactions for employees being terminated; in addition, it can be the foundation of an unfavorable change in employee morale for the employees who are sustained. Restructuring a company entails many complications: legal considerations, the cost of separation, and the lingering doubt of whether it is really effective or the best alternative. Each of these factors plays a role in the process of cutting back employment. In the case that downsizing is not the greatest decision companies may take into account that there are substitutions for reducing employment that are not as undesirable.

Replacing terminated workers can have detrimental effects on the company. This expense includes termination costs as well as training and integrating costs of new hires. In cases where terminations include severance and outplacement costs plus the training costs of the new hires, total costs are equal to one or more years of the dismissed employees’ cost to the company. In addition, many of those employees who do choose to return to the organization will only do so under their own conditions. Due to the fact many have gone out and started new ventures, they are not willing to give up their careers under any type of circumstances.

The short-term alternatives to corporate downsizing often deal with cost savings. Many companies’ first reactions usually involve reducing employee hours or wages. If their decision is to cut wages, this tactic should be administered fairly. It would not be fair to cut the wages of only entry-level positions or non-management positions. These positions should not be the only ones to suffer when the company starts to experience financial difficulties. Both executive positions and management positions need to be a part of the wage reduction program because they too are an integral part of the organization. Everyone benefits from the profit when the organization is doing well, therefore everyone should bear the consequences when the organization is not doing so well. Many studies suggest that the wages of executives and managers be reduced by the highest percentage. After all, their wages are harder for the organization to fulfill. When companies decide to reduce the number of hours their employees work, they usually implement this by trying one or two strategies. The first strategy is cutting the amount of hours each employee works. The company may implement a shorter workweek, or decide to cut the amount of hours worked per day during the week. This is especially considered during the slow periods, such as the summer or periods following peak season. Organizations may also try job sharing among the employees. Job sharing is when two employees split the work of one position. The employees participating in job sharing not only share a workload, but they also have their wages and benefits reduced. Many organizations will find that their employees will have a hard time adjusting to these changes, however the employees will usually appreciate either of these methods over downsizing or shutting down the company completely.

Similar to mergers, corporate restructuring is also an explanation for organizational downsizing. During corporate restructuring, companies make an effort to improve efficiency, productivity and lower cost. Reformation of an industry usually requires that some portion of the company be eliminated. As a result, a fraction of the employees are extinguished. This type of turnover customarily requires a substantial amount of planning and therefore provides employees with the knowledge that job shrinkage is to be anticipated. Once the sector of the company phases out, employees with seniority are typically moved to another department; as a result, these employees have to undergo training for their new job and management duties are shifted to accommodate the remaining workers. These motives for downsizing occur in corporations that are making an effort to increase profit and decrease inefficiency. The reasons mentioned are widely seen as respectable initiatives for downsizing. However, there are other reasons underlying corporate downsizing that are not as appealing.

Searching for new employment while recovering from a bruised ego and accompanying stresses is also inevitable. This requires reviewing and revising of the resume. It can also force the employee into making hasty employment decisions that may prove to be bad choices.

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