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Downsizing

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In a business enterprise, downsizing is reducing the number of employees on the operating payroll. Some users distinguish downsizing from a layoff , with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may later be rehired. Businesses use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people.

Rightsizing is downsizing in the belief that an enterprise really should operate with fewer people. Dumbsizing is downsizing that, in retrospect, failed to achieve the desired effect. conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness.

Downsizing can be effective if implemented appropriately. Companies must be careful to avoid sending the wrong messages to employees, shareholders and the media. Successful downsizing requires managers to:

Evaluate the overall impact of downsizing. The total cost of downsizing—including both financial and non-financial costs—must be taken into account. Managers must calculate the present value of all costs and benefits associated with the cuts, including severance packages, lower employee productivity due to disorder or talent loss, eventual rehiring expenses, future rightsizing costs and the lost opportunity costs associated with not having the appropriate manpower to accelerate out of the downturn. Investing in areas customers care about—while competitors are cutting back—helps position the company to take or sustain the lead once conditions improve. The value created from downsizing should exceed the cost of lower employee morale and potential damage to the company's reputation;
Develop a smooth downsizing process. It is crucial that

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