Downsizing is an institutional strategy to reduce costs by reducing the workforce and closing facilities that do not achieve profitability (Engen, 2018). This is in response to market conditions or restructuring the organization to achieve greater profitability. On the other hand, rightsizing is a strategy to achieve the optimal institutional structure by redistributing the company's resources to meet its future needs. This may include laying off some employees, hiring new employees, opening departments, and closing other departments.
Downsizing and rightsizing:
The difference between Downsizing and rightsizing is that Downsizing focuses on laying off employees and improving operational efficiency. In contrast, rightsizing focuses on finding the organizational structure and the optimal size for the organization. Also, rightsizing is usually a remedy for the organization's problem, and sometimes it is a problematic remedy (Platt, 2004). Still, Downsizing is a proactive approach before any problem occurs. The result of Downsizing is always a smaller organization with fewer human resources, while Rightsizing improves human resources, either by decreasing or increasing to achieve long-term goals. Finally, the work environment in Downsizing is less stable than in Rightsizing, as in Downsizing, every employee thinks they are the next to leave the organization (Miller, 2010).
The Human Resources Manager Role:
In Downsizing, the human resources manager works with senior management to create a plan to reduce costs by eliminating specific jobs and giving no longer advantageous positions useful. The human resources manager needs to study the legal status of the dismissal procedures and their worth to the company, as they may bring short-term losses more than long-term gains. On the other hand, the Righsizing Human Resources Manager works to redistribute job roles. They may need to hire new employees, let go of old employees, reassure existing employees, and mitigate the impact of the shock of some leaving the company (Wilkinson, 2005).
IBM Downsizing:
In 1992, IBM faced significant challenges that led to adopting an expanded downsizing strategy called "Project Renaissance." This strategy reduced the workforce from 405,000 employees to 220,000 employees by 1996. This strategy was one of the main factors in the company's success, rebuilding its organizational structure and returning to compete in the technology market again (Koeber, 2002).
Ford Rightsizing:
In 2006, Ford faced financial challenges that almost put it out of competition in the car market because of the higher labor costs compared to competitors, the lack of sales, and their uselessness because they did not compete with foreign cars. As a result, the company adopted a rightsizing strategy called the "Way Forward Plan," It closed 16 factories that employed 30,000 employees and reduced production capacity to 26%. This strategy resulted in the company's strong return to the car market after issuing several new models and investing in new technologies (Sroka, 2021).
Conclusion
Generally, Downsizing and Righsizing are two different ways of managing an organization's resources. While Downsizing is often seen as a last resort to cut costs in the short term, rigging is a more proactive approach that seeks to optimize resources and achieve long-term success (Sroka, 2021).
References
Engen, J. (2018). Rightsizing a mammoth: GE, once an icon of integration and synergy, is undergoing a massive retrenchment. What does that tell us about the future of conglomerates? Global Finance, 32(9), 18-19. Retrieved from ProQuest Central
Koeber, C. (2002). Corporate Restructuring, Downsizing, and the Middle Class: The Process and Meaning of Worker Displacement in the "New" Economy. Qualitative Sociology, 25(2).
Miller, T. (2010). Downsizing and Rightsizing: Why they are needed and how to do them.
Platt, H. D. (2004). Employee downsizing. In Principles of corporate renewal (2nd ed., pp. 201-252). University of Michigan Press. Retrieved from EBSCO eBook
Sroka, Z. J. (2021). Work Cycle of Internal Combustion Engine Due to Rightsizing. Internal Combustion Engine Technology and Applications of Biodiesel Fuel, 3.
Wilkinson, A. (2005). Downsizing, rightsizing or dumbsizing? Quality, human resources and the management of sustainability. Total Quality Management and Business Excellence, 16(8-9), 1079-1088.