Today increased development of new concepts, procedures, improvement of the management of a company. This contributes to increased competition, both in the domestic and international markets. For example, the concepts of benchmarking, outplacement, outsourcing, outstaffing etc. are gradually coming into use of members of today’s business environment. Along with the above policy management tools are gradually being introduced into the practice and the phenomenon of downsizing.
Downsizing is a number of changes relating to the organizational structure of the company, and the changes are aimed at “reducing the size of the organization to improve its performance and reduce the expensive part of the budget, mainly due to staff reductions”. In another words, the term downsizing can be describes as a process that is aimed to reduce the size of the organization to improve its functioning and cost-reduction of the budget, mainly due to the reduction of personnel (Garber, 2008). Also, there is a definition, which states that “downsizing” is defined as a set of activities (strategy) associated with the optimization of the size of the organization through more efficient HR-activities transform the structure of the company, changes of key objectives and business processes. Downsizing, albeit timidly, but can be called habitual and familiar (especially since the 1990s.) (Cooper, 2012). “Reduction” in the company’s restructuring is connected with mergers and acquisitions of the departments, introduction of new technologies, and optimization of the organizational structure of the enterprise (Mondy, Noe & Gowan, 2005).
The concept of reduction is a natural consequence of the ideology of those years. In the 1980s. Market forces have received the status of disaster. The profit motive has suddenly become the only real social power, crushing the weak socialist ideals of economic equality. Reduction used with such enthusiasm and disregard for the people that all who are with it come across – both victims and survivors – began to consider it nothing more than a cynical reception. In many such cases, the corporate income significantly increased, while conditions for many working families have not changed for the better or continue to deteriorate.
The procedure for downsizing, first of all, is a kind of anti-crisis measure for the company, which is primarily aimed for saving payroll and other expenses. In situations of crisis management companies thoroughly review of management and given the difficult financial situation caused by the failures of global errors in production, “weeds out” the least effective and prospective employees. However, there are times when downsizing is used not because of a tipping point for a particular company, but because of the modernization, automation of work processes in manufacturing organizations. Sometimes, the number of positions eliminated “as useless hands”. Also, some large companies “keep for themselves” various service structures (transport, production base for the maintenance division, in charge of energy management, etc.). All of these “tails” are expensive and, therefore, more efficient and easier to work with specialized companies on a contractual basis, rather than keep them on its balance sheet.
It should be noted that downsizing is quite sharp, traumatic tool management policy. Its results, first of all, have painful impact on those who have lost their jobs, their family and friends. With the staff of the company, as the labor force – is not correct. In any case, company’s management must always remember that the staff is the most powerful, the most valuable resource of the company, its “heart”. Therefore, such a necessary mechanism requires attention, even if the procedure is downsizing is inevitable. Many western companies are aware of acute reduction tool and develop various alternatives to downsizing.
In current business environment, there is a tendency to the predominance of skepticism about the drastic management reforms, including to the downsizing. But every year the economic and business processes are developed, the competition is growing at a rapid pace.