This article is of interest to corporate management and Board members who are exploring the option of downsizing their workforce. Cascio delivers a lengthy review of real-world risks, benefits and disappointments by organizations choosing to downsize. It is highlighted that a Strengths, Weaknesses, Opportunities and Threats analysis be carried out first. This will assist management to make an informed decision as to whether to downsize, and how to implement their decision in a responsible and transparent way (Horngren et al. 100; Hoggett, Sweeting and Radford 15). The goal of strategy change is to enhance market competitiveness and to align with international discourse of corporate social responsibility (CSR).
Management may decide to downsize with the goal to improve returns. Evidence shows that this is only a short term solution. There are significant social consequences, such as the loss of human resources, customers and suppliers confidence. Future growth will be more costly because of having to continuously hire new staff to be trained; low wages and poor working conditions do not endear staff loyalty. Further, there can be a lack of corporate structure following downsizing, in turn increasing the workload and interpersonal and intrapersonal pressures on staffs, affecting customer interest and loyalty. With regard to needing a strategic option that is a preventative measure to reduce costs, downsizing is a last resort.
Are Employees Assets or Costs
Management accounting classifies labour as a variable cost rather than a fixed overhead (Horngren et al. 10). Employees are viewed as "costs," to be "cut" when downsizing. Human Resource managers however, view people as the greatest asset within a corporation, which is a network of social beings interlinked with external networks. As Cascio notes, contemporary responsible restructuring requires that employees be seen as assets to be developed. Multi-skilling of employees is a key training focus within commercial industry today, with R&D using predominantly government support, to study organizational culture, leadership patterns, continuous improvement and learning across the lifetime.