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Downsizing Strategy: The Reasons and Benefits Report (Assessment)

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Updated: Dec 7th, 2021

Downsizing activities would all be focused on improving efficiency, productivity and competitiveness. The main motive behind a downsizing strategy is the anticipated cut off in costs that are incurred for paying the staff in a business organization. Downsizing by a margin of 15%is likely to bring forth a reduction in the workforce which will be reflected in the reduced costs of the business. This should be considered as a short term benefit but besides it lies a long term risk especially with the surviving workforce. This is in terms of their security, job satisfaction and other related factors. As a manager it is vital to tackle the challenge of downsizing with a lot caution. This particularly regards the workforce that survive the effects of downsizing. Since the process is inevitable, the best approach would concern good management of the workforce that survives. Firstly it is important to note that downsizing has implications to the remaining workforce in terms of confidence and loyalty to the organization. The best strategy would be to restore the declining confidence in the workforce and demonstrate to them that they are valued and that is why they survived the downsizing wave. Addressing the symptoms of layoff survivors is crucial towards the efficiency and productivity of the workforce. Things like anxiety, guilt, relief, depression and many other mixed reactions should be adequately dealt with so as to boost organizational moral. Adequately tackling the management of the survivors would be a long term strategy that would help the business improve on its competitiveness. The wise strategy would be to pick the low lying fruits and also focus on the safety of those that can be found higher on the tree.


Important things to consider:

  • Communication and It systems.The success of outsourcing is entirely dependent on good communication systems alongside excellent IT systems. All this is required to carry out all the logistics on the ground and deliver a reliable report concerning the viability of an outsourcing strategy.
  • Availability of resources to foresee the implementation of outsourcing activities. This can be looked at in terms of finances and adequate IT personnel.
  • The exact processes to be outsourced. Good decision has to be made on the perfect process the needs outsourcing. For banks data management seems to be the best choice it is easy to move but expensive to process at some locations.
  • The readiness of the company to undertake outsourcing is yet another very important aspect. This has to do with to what extent the company is fully in control of the specific processes that matter in outsourcing. The stability of processes in the company is very crucial to outsourcing in future.
  • The type of outsourcing arrangement to be adopted also matters, companies have to choose between outsourcing and captive arrangements in mixing and matching their outsourcing activities.
  • Transitions also matter in outsourcing because some people in the organization may be resistive to change associated with outsourcing. These are difficult processes to undertake and technical problems may arise.
  • Cultural issues are present during outsourcing. These are well managed through documentation with the current workforce and also through exchange programs. Education and training of the current workforce on the domestic facilities is also a measure to take care of cultural issues.

For an engagement to advise a client on outsourcing I would require knowledge and skills in Information and communication systems. This would be fundamental in assessing the current position of the company and its readiness to undertake outsourcing. Excellent information systems would concern availability and security issues that concern information in the company. How well these systems are managed would form the basis for my advice on outsourcing. Knowledge on the best vendors of services would also be essential. This would form an understanding on the best approach to take in terms of vendor relationships to prevent issues of cost and quality from arising in future due to lack of competitiveness on the part of the vendor. These knowledge and skills would be acquired from experienced companies and vendors that have enjoyed success with outsourcing activities. The knowledge can also be accessed from consulting firms that have long experience of outsourcing.

Political implications

This would concern the prevailing political situation in the country. Political stability would be a fundamental issue to be considered by the outsourcer for the sake of security of their services. Other political implications would concern the issue of interference by the political class in matters concerning the outsourcing activities.

I would advise the outsourcer to carefully explore first at the existing business relationships in the location and how politics relate to operation of business in that particular country. If there are any threats to the outsourcing relationship then that location should not be considered to be politically conducive. Politics matter a lot in issues concerning outsourcing and especially with countries that have not been enjoying good diplomatic relations because of rivalry. It is had for an American company to outsource from Middle East countries like Iran. Tensions in neighboring areas can also be a threat to business operations. For instance if the company wishes to outsource from India , it is clear that there has been tensions with the neighboring Pakistan ad this can interfere with operations. It is advisable not to focus on only one region only but to have a variety of options in different parts of the country or alternatively seek a different location in another country.

As for the French company my advice would be based on the strengths and weaknesses of outsourcing in a country like India. First it is vital to consider the costs that are associated with training of the Indian workforce as compared to the French. This is because the Indians though are seen to be a low cost, their competence is below that of Americans and French.Therefore it might take longer than anticipated for the operations of the business to get the momentum. Customer service operations would be best to be outsourced because a number of American companies are doing it and are experiencing success despite a few challenges. Financial operations can also be outsourced from India and Philippines. This should be done after considering the cost and quality. The two countries can offer excellent services with their IT systems at more affordable costs. Technology and communication systems have improved in the countries in the recent past with a reduction in cost of bandwidth and software’s. Besides, the costs of labor in India and Philippines tends to be more attractive. Therefore it is believed that other countries like France can also explore these markets if their American counterparts are finding quality at reduced costs.

The French firm can achieve greater success now that there is awareness on the challenges ahead and the potential opportunities that need to be explored in India and Philippines with regards to outsourcing services. The important thing in outsourcing would be to address the existing challenges and they would achieve desired results in their outsourcing endeavors.

Improving cost performance

Once downsizing has been affected in the firm, it should be followed immediately with outsourcing. A suitable vendor of services should be searched in India or the Philippines. After picking these low lying fruits, focus should now shift on efficiency and productivity. Assuming that the outsourcing company would be delivering quality services at the anticipated low costs, the management can shift their attention to other important sectors of the business that aim at increasing the market share and overall competitiveness. Efficiency of the workforce should be improved to greater heights to ensure that their production output meets the demands from the expected market share increase. In house activities and operations should now reach their top performance. This is the reason they can hire my services to streamline operations in house with better strategies that can improve the competitive advantage and take a new position of the business in the industry. Once in-house activities are at there best performance and the outsourcing company is delivering quality good results would be very easy to come and would be easily noticed. This would be noticed by the increased profits and revenue collection in the firm as a result of downsizing and outsourcing activities. This is the success the firm is looking for using the best strategies.

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