Downsizing

Downsizing Concept

Downsizing emerged as a need to solve the excessive bureaucracy that was verified in many organizations, and that, beyond slowness, made difficult the decision making and the accommodation to new environmental contexts. In fact, many organizations adopted with moderate success the concepts and techniques supplied by the Bureaucracy Theory but, with the increase of competitive levels, and the environmental turbulence, was needed to re-think the decision making structures and methods, as a way to raise the quickness in the answer and the adaptation capacity.

Downsizing results, thus, in the reduction of the management levels and the reduction of the organizations’ dimension through the cancelation of the non essential productive areas, focusing on what they know best (core competence), subcontracting in the exterior (outsourcing) non fundamental activities for the core-business, allowing a higher flexibility of the organizational structure. However, the practical application of Downsizing consisted, mostly, in the costs cut-down in areas considered non essentials, generally resulting in the dismissal of numerous employees.

Despite the costs cut-down advantages and the higher organizations’ flexibility, usually through the cancelation of activities related with less profitable products, which allows efforts and resources concentration in the most profitable areas, Downsizing continues to be very criticized and badly accepted due to the dismissal problems. In the theory field, many management gurus ferociously criticize the usage of downsizing by the organizations. Names as Peter Drucker and Charles Handy would come public throwing their resentment. Robert Tomasko, one of the concept’s authors, affirmed that people would have gone too far in the downsizing use. Michael Hammer, author of the best seller Beyond Reengineering, explains that the reengineering didn’t have anything to do with the downsizing and that should have been applied for the company’s growth, and not for the costs cut-down. Prahalad, who wrote with Gary Hamel the book Competing for the Future, called downsizing business anorexia.

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