Another closely related advantage is the fact that downsizing may result in leaner organization, and hence more flexible organization. It may be argued that during times of slump in demand, companies experience excess number of people who are not producing enough to contribute to the efficient management of the business. As certain number of people are only appropriate for certain level of activities in the life of the business, management may opt to go for leaner organization by resorting to other means like outsourcing in order to have leaner organization that would allow the company some flexibility in its resources.
While there are apparent advantages of downsizing when the time comes, there are also perceived disadvantages. One is the loss of loyalty from employees. It is a fact that employees want to be treated as people. They want to think that they are not hired as if they are calculators, computers or machines that are just used in business when they are needed and only to be disposed of when there is no more need for them. As complex as humans are, employees need more than their physical needs. Work for them is sources of psychological, mental and emotional health as well.
Hence to terminate employees when they are not already needed would offend their greatest sensibilities and would defeat any sense loyalty to the companies for which these employees may have given some of the best moments of their lives. Another disadvantage of downsizing is the possibility of losing one of best sources of competitive advantage in business. While there could be competitive advantage in technology, theorists agree that people of the organization is the best source of competitive advantage.
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One may have the best equipment and the best technology but the if it lacks a motivated people to move the organization, it may loss the big chance of really developing people that will bring the company to great heights of success. After discovering the advantages and disadvantages of downsizing, knowing its cause and objectives would seem not farfetched. Since downsizing is a business strategy, it is particularly aimed in enhancing the profitability or survivability of a business organization by reducing the number of employees so as to reduce cost and to make organization leaner.
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