DOWNSIZING is the act of reducing the number of employees within a company in order to decrease costs and increase efficiency, with the ultimate goal of greater profitability. Downsized companies either continue the same work functions with fewer employees or they decrease the scope of company wide activities.
More than 85 percent of Fortune 1000 corporations downsized professional staff between 1987 and 1991, and analysts have suggested that the rise of automation is causing the loss of jobs, both in manual labor and service industries. In 1996, the New York Times wrote that, because of downsizing, the workplace is changing as greatly as it did during the industrial revolution.
Advocates applaud streamlining, believing that down-sizing reduces bureaucracy and leads to greater productivity. Critics, however, cite a 1991 Wyatt Company survey of 1,005 downsized businesses, which found that fewer than one-third of the companies experienced projected profitability, 46 percent discovered that expenses did not decrease as expected, and only 22 percent encountered satisfactorily increased productivity. Downsizing also eliminates employees with vital skills, leading to disruption of productivity, and employees who remain often experience reduced morale.
New York Times. The Downsizing of America. New York: Times Books, 1996.
See alsoCorporations .