Downsizing for Optimizing Firm Efficiency

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Table of Contents

Introduction
Analysis
Integrated Solutions
Justification
Summary
Conclusion
References

Introduction

Among the many challenges a firm face is maintaining the optimum number of employees. When the number of employees is high, the firm incurs high overhead expenses. Secondly, there are a lot of lengthy procedures involved with the approval of policies before they can be executed. Overstaffing, high operational costs, and delayed decision-making processes contribute to consumer dissatisfaction, thus affecting the firm’s efficiency (Zhou & Wu, 2019). The adoption of downsizing to mitigate the challenges mentioned above forms the basis of discussion for this paper.

Analysis

Consumer dissatisfaction usually arises from firm inefficiency. The consumer feels disappointed when the actual service delivery contradicts their previous expectations. When this happens, customers blame themselves for choosing the wrong service provider when it turns out that the foregone alternative could have delivered better services. It can have detrimental effects on the firm’s performance. Negative reviews taint the business’s reputation, thus discouraging many potential buyers and reducing sales volume. Many buyers do not express their dissatisfaction through the relevant channels, making it difficult for the management to fix the issue on time (Kwakkernaat, 2021). Low quality, overpriced goods, delayed delivery, and hostile customer service aggregately lead to dissatisfaction.

An overstaffed company may have difficulty creating solid interpersonal between its customer and employee. Some employees may be purposely unresponsive to customer needs due to the lack of oversight they receive from their departmental leaders, creating more issues for the organization. In addition, most firms experience redundancy during their day-to-day operations due to adopting a fixed routine, objectives, and obligations. This repetition can be reduced through downsizing by reducing the number of employees required to handle existing duties. As a result, the business becomes more efficient, and money is saved on tasks related to others.

Integrated Solutions

Downsizing, which has become a global phenomenon in recent times, is a strategic decision made by a company to reduce a proportion of its factors of production, such as human resources, to boost its performance. Organizational downsizing is a valuable management model that aims at improving a company’s functional capacity, as highlighted in chapter six: Mergers and Acquisition strategies of the attached class notes. Employers can use job redesign as part of the restructuring process. The main objective of this mechanism is centered on the elimination of irrelevant vacancies.

Secondly, redesigning is another essential strategy to enhance customer satisfaction and firms’ efficiency. This technique differs from restructuring because workers retain their previously held positions; hence the workforce does not interfere. The approach primarily entails the redaction of existing job vacancies within the firm. The human resource manager identifies vacant positions that have been in existence for at least six months before being permanently deleted.

Under exceptional circumstances, duties performed by employees in such slots are transferred to other workers handling related responsibilities. In most cases, before a space is redacted, it is criticized based on productivity and relevance, thus making the strategy employee-friendly and at the same time beneficial to the firm. Concurrently, restructuring can involve liquidating subsidiary branches that are no longer profitable to the parent company. The leading company redeems identifiable net tangible and intangible assets in the affected components, and if irrelevant, they are disposed of at a gain or loss.

Essentially, restructuring facilitates the free flow of information from top hierarchical positions in the company to the subordinates (Roy, 2020). It bridges the gap between the decision-making process and implementation in the long run by shortening the phases through which a choice has to move through before it can be executed. As a result, the time taken before the managers can address issues and concerns raised by clients, employees, the government, or the general public is significantly reduced. Similarly, computing costs are minimized considerably when a firm transfers computer facilities from mainframes to minicomputers or mini to microcomputers. Help desk automation can be adopted to enhance the timely response to customer inquiries.

During the downsizing era, the loss managers, directors, and other top executives can help the organization’s management explore the capabilities of the existing workers (Jung & Lee, 2021). Evaluating skills held by the remaining workforce can provide opportunities for promotions and transfers across departments which translates to salary increments. This acts as an incentive to employees, making them serve customers better while enhancing their relationships with them.

Justification

The stiff competition in today’s business world, rapid volatilities in business cycles, new technological advancements, and the shift of firms to service delivery have all been attributed to restructuring. This should encourage other firms to capitalize on the trend to remain competitive and keep up with the dynamic business world (Brauer & Zimmermann, 2019). The section below highlights some of the benefits accrue to a firm that adopts the policy.

Downsizing is the essential propagator of firms’ positive change in employee culture. Renewing the focus of employees’ by an organization will increase satisfaction and appreciation, which produces a better end product. It will lead to increased loyalty and teamwork, making it easy for them to uphold the company’s promises to the client through effective service delivery.
Restructuring improves the morale of the remaining workers in the long run. The retained employees feel appreciated and valuable for not being retrenched, making them work more diligently to maintain their positions if such policies are re-introduced. Some of them can decide to further their education to meet new career expectations in their respective field to avoid being targeted during downsizing times. More qualified staff implies better service delivery to clients hence improved work efficiency.

Summary

According to Ferrary, downsizing is an effective technique for any firm whose results are lower overhead costs, faster decisions, and increased production. He further clarifies that the main reason for downsizing is to improve its efficiency compared to its competitors (Ferrary, 2019). A business will grow if its revenues are high enough to offset its running costs. The bigger the firm, the easier it is to incorporate more complex expansionary approaches, such as engaging with other firms through mergers.

Conclusion

Due to the competitive nature of the business world, an increase in a company’s direct costs compels it to adopt relevant precautionary strategies even if they are not in employees’ best interest. High operational costs can sabotage continuous services provided to customers. This translates to dissatisfaction among them; hence, the firm’s performance is severely compromised. A decline in the number of clients served is a precursor to business failure if not addressed on time. As illustrated throughout the paper, the scheme allows companies to minimize expenses and enhance productivity, resulting in a cost-effective operation of the firm.

References

Brauer, M., & Zimmermann, M. (2019). Investor response to workforce downsizing: The influence of industry waves, macroeconomic outlook, and firm performance. Journal of Management, 45(5), 1775-1801.

Ferrary, M. (2019). The structure and dynamics of the CEO’s “small world” of stakeholders. An application to industrial downsizing. Technological Forecasting and Social Change, 140, 147-159.

Jung, J., & Lee, Y. (2021). Financialization and corporate downsizing as a shareholder value strategy. Socio-Economic Review.

Kwakkernaat, J. (2021). Ranking the stars. A study into the effect of downsizing on firm reputation.

Roy, R. S. (2020). Downsizing–Overall Impact on Workforce and Organizational Performance.46-365.

Zhou, Z., & Wu, C. (2019). The Effect of Public Sector Downsizing on Private Firm Profits: Evidence From China. Available at SSRN 3415899.

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