Submitted by: Submitted by xanderstyle
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Category: Business and Industry
Date Submitted: 01/31/2011 09:24 PM
SIIB |
DOWNSIZING COSTS |
COSTING ASSIGNMENT |
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1/30/2011 |
DOWNSIZING COSTS
Downsizing is a commonly used euphemism which refers to reducing the overall size and operating costs of a company. It is done directly through a reduction in the total number of employees or decreasing operations. It is also called as Layoffs, Resizing, RIF (Reduction in Force).
Reasons for Downsizing:
* The primary reason is to make the daily operations of a business more efficient. E.g Assembly line Automation.
* Shutting down a unit/division because of non performance.
* Wrong Manpower Estimation-so trimming the overloaded staff /redundant staff.
* Recession/ Weak Economy
* During M&As.
Some Major Facts:
* Downsizing affects only small percentage of workforce- 1-2%. (Negativity).
* Statistics show that major staffing areas affected by downsizing are- Accounting and Production. (29% and 28% respectively).
* The Flip Side- Reducing the number of employees is an immediate and unhealthy way to pump plasma into an anemic bottom line.
* In long term it can leave company- talent hungry and risk for long term financial failure.
* Downsizing can also prove demoralizing.
* But if done correctly can tighten operations and boost up bottom line (e.g. BSNL ‘s downsizing under consideration).
Costs Involved in Downsizing:
* The expenses to retain consultants and others to provide downsizing advice.
* Cost of hiring temporary, leased or other part-time workers to fill employee gaps.
* There is also the possibility of tremendous expenditures with "charges against earnings" for early retirement and severance packages.
Downsizing Plan:
1. Determine the objectives -Restructuring, or cost reduction or increasing bottom line, M&A , weak economy etc.
2. Identifying the target group and notifying employees and meeting legal regulations.
3. Calculating costs...