The Effects of Downsizing
The adoption of downsizing has profound
financial and human consequences. This has been
covered extensively in the literature. A closer
analysis of the effects that have manifested in the
wake of downsizing presents a complex picture
with the following questions emerging:
ï Is downsizing an effective strategy?
ï Does downsizing lead to improved financial
performance?
ï Have downsized firms been able to reap the
anticipated financial improvements?
Unequivocally, the overall picture of the reported
financial effects of downsizing is bleak. While a
few firms have reported some financial
improvements, the majority of surveyed firms have
been unable to report improved levels of
efficiency, effectiveness, productivity, and
profitability (Sahdev, 2003; Zyglidopoulos, 2003;
Macky, 2004). Table 1 presents a non-exhaustive
overview of some of the main studies carried out
and their respective findings.