What is Downsizing?
Downsizing is a strategy used to reduce the size and scope of a business in order to improve its financial performance, usually by laying off employees or closing less-profitable divisions.
How Downsizing Works
Downsizing often takes place as part of a larger restructuring program at a company. Although it's usually thought of as a strategy companies use to become smaller, downsizing can also be the result of company mergers, acquisitions, and takeovers.
Why Downsizing is Important
Downsizing is typically implemented during economic downturns in order to improve efficiency and maintain profitability. However, if too many companies cut payrolls, it can exacerbate the downturn and lead to higher unemployment.