Is downsizing the answer to reducing business costs ?

images (4)Economic downturns, financial difficulties, changing market conditions, mergers or other factors may suggest that reducing the workforce is the answer. This has been a very pervasive managerial practice for over decades, but the question that arises is – how successful is this practice in reality ?

In many cases the pain related to downsizing cannot be avoided but time has shown that such activities rarely deliver the anticipated results. The impact on the human element may in many cases outweigh the minor benefit gained in terms of reduction in HR costs.

Research shows us that the consequences of layoffs in terms of its impact on the selected employees have a much greater impact. It impacts the concerned individual, the family and what is even more important with reference to the organization is its impact on the remaining employees – their morale, their level of commitment to the organization as well as their future performance.

The above factors should be considered and in my opinion, layoffs for streamlining the organizational structure or any related layoffs should be considered after analyzing the situation in terms of the business and economic scenario in the current, short & long term basis and consider whether it is really a viable option or not.

In fact it would be more prudent to review other options such as

  • a hiring freeze,
  • reduction in increments,
  • controlling overtime,
  • streamlining processes for greater efficiency,
  • exploring other cost reduction ideas


REMEMBER, the impact of downsizing could lead to a drain on your talent which would have greater ramifications on your business which cannot be quantified. Not only that, it portrays a negative picture of the company in the market making it more difficult to attract the right talent in future.

The role of HR in the above options cannot be minimized as in most of the processes HR has to play a lead role. Not only that, HR has a pivotal role to play in communicating the changes taking place, keeping up the morale of remaining employees, maintaining  friendly contacts with laid-off victims and generally being available for answering any queries which may arise in employees minds.

I await your thoughts on the above topic …………………….


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