Reducing the size of the organization or reducing number of employees in the organization is called downsizing. Downsizing is a critical decision take by organization and human resource management have important role to play in this context.
This pattern seems to represent a “churning” of employees. Organizations were laying off employees with outdated skills or cutting whole businesses that were in declining markets while simultaneously building businesses and employee bases in newer, higher-growth markets. Initially layoff refer to the temporary suspension of the employees but now this term also refer to the permanent suspension of the employees.
Reasons of Downsizing
Organization take downsizing decision due to several reasons some of them are mention below.
Mergers
When two organization in same industry take the decision to combine their resources for exploiting opportunities and reduce their cost.Downsizing take place in mergers because their are more than one person for the single position, so company have to take rational decision to layoff some employees.
Acquisition
One organization purchase other results in change management. Mostly stakeholders take decision to layoff employees to cut the cost and Increase revenues and profits.
Economics crisis
Recession or depression lead to the financial crises in the organization. To avoid losses organization have to reduce the number of employees.
Change management
Processes,procedure or higher management change can also result in downsizing.
Optimization
Due to intense competition companies sometimes aimed to increase revenues and profit to benefit the shareholders. In order to do this companies take the step of downsizing for maximum utilization of human resource.
Human resource management role in downsizing
All employees should be informed why the downsizing is necessary, what costs are to be cut, how long the downsizing will last, and what strategies the organization intends to pursue.
Human resource management play vital role in downsizing to communicate the message in a right way that it will not harm organization image and employees have positive perception after leaving the organization.
Downsizing also impact on the mind of employees working in the organization they feel insecure about their job. HR managers should tell all the employees that their job are secure.
Human resource department should assist the layoff employees in finding other job.