Downsizing Dilemma: Why Is It Seen as the Only Option in Corporate Crises?

Scholars, I need to know why downsizing or rightsizing (decruitment) is seen as the only option during economic and corporate crises.

When the national or international business environment is unfavorable, companies start facing headwinds. This leads to a reduction in business volume. Despite the decreased business, it is crucial to maintain the same level of staff engagement. Employees must be assigned sufficient work. Companies cannot afford to wait for a better business environment while retaining the same staff strength, resulting in worker retrenchment. The term used to describe this manpower reduction is "rightsizing."

Reasons for Rightsizing

Rightsizing of the workforce does not solely occur due to low business demands. When companies adopt new technologies or automation, certain roles may become redundant. Consequently, individuals are let go when there is no suitable work for them. Technological advancements often lead to waves of redundancy. While it may be a significant setback for the displaced worker, it is imperative for the company's survival in a competitive market. Companies that fail to rightsize in a timely manner jeopardize their own existence.

If excess baggage is not eliminated, an overloaded ship is at risk of sinking. The responsibility of the ship's captain lies in identifying and discarding this excess weight for the greater good of all onboard.

Thanks,

Dinesh Divekar

I would also like to join the discussion by adding something more to what our learned friend, Mr. Dinesh, has rightly observed. Economic or corporate crisis is a formidable phenomenon, mostly external and beyond the control of an individual employer. Such a situation would demand strategic adjustments at least to stay put instead of getting washed off. Labor, more than necessary in tune with the shrinkage of business activity or in terms of technological upgrading, automatically becomes an economic dead weight. So, jettisoning becomes inevitable for the employer to save the ship, as pointed out by Dinesh. Among all the factors of production or industrial activity, including technology, only labor is the most negotiable one. Hence, downsizing or right-sizing is the universal option during times of economic or corporate crisis.

Regards, Odumni