What is downsizing? Understand its meaning and how it is done

What is downsizing?

Downsizing is a process that occurs when there is a reduction in a company’s workforce. The goal is to adjust the number of employees according to productivity and reduce costs.

Although it may be a common process in a period of declining revenue, it can also be used to reformulate the company’s production process to make it more streamlined.

In English, the term has a meaning related to a  reduction in capacity  . The process is carried out through an administrative restructuring in the direction of the decrease.

This strategy is estimated to have appeared in the United States in the 1970s, adopted as a way to improve the production efficiency of North American companies.

Personnel reduction strategies aim to reduce the costs of the company by reducing its organizational structure. Eliminating less productive work teams is the fastest way to eliminate costs.

Downsizing can also be done to eliminate obsolete parts of a productive sector. Sometimes, some employees can stop being useful for the company because they have taken different directions from the initial ones.

It is worth noting that downsizing does not include regular layoffs or retirements. It is a strategy that can target the short, medium or long term, more or less intense.

Consequences of downsizing

Downsizing can have consequences for the company, especially if it is adopted in an incorrect or disorderly manner. If the long term is reached, the company may never recover.

One of the problems can arise if the company cannot correctly reach its best productivity level according to its turnover.

The costs of having employees trained and accustomed to the company process must be taken into account, as they can be overlooked after applying the strategy.

Main features of downsizing

  • Costs reduction;
  • Elimination of bureaucracies;
  • Faster communication between team members;
  • Elimination of non-essential positions;
  • Increased productivity ratio by number of employees;
  • Decisions made faster.

Reduction and sizing

Size correction is also a process of changes in the organization of the company, but with a greater focus on promoting restructuring in any sense.

While downsizing is aimed at reducing costs by reducing the number of employees, adjusting duties allows the company to adapt to current scenarios.

The size correction can even avoid layoffs in the company in times of crisis, due to the care it took in previous moments.