Why Reducing the Size of the Workforce Might be Necessary


Business Studies - 7115

Why Reducing the Size of the Workforce Might be Necessary

Why Reducing the Size of the Workforce Might be Necessary

Difference Between Dismissal And Redundancy With Examples 

Workforce Planning

Establishing the workforce required to run the business operations for the foreseeable future in terms of numbers of employees and skills required in the employees is commonly known as workforce planning.

The requirement of the number of employees is based upon various factors like a sales forecast, expansion in business, introduction of new products in the market, adopting automation, etc.

In business, it is not necessary that the number of employees will increase only, it can be decreased as well according to the situation like adopting automation may decrease the number of employees even if the business is expanding.


Downsizing is basically a strategy that is generally used to reduce the size of the business by reducing the number of employees.

When any business wants to reduce the number of employees, it is common practice that it goes for one of the options from Dismissal or Redundancy. 

Sometimes, workers also leave the job. They reach the age of retirement and get retire or they resign when they find some better opportunity.    


When an employee is informed not to continue the job because of unsatisfactory work or behavior is called dismissal. We can have the example of an employee who always gets late to the work and continues the same practice even after various warnings. The company will probably dismiss that employee. 

If an employee is involved in any corruption or stealing money or any valuables from the office would also be dismissed.  

In the same way, if an employee is failed to perform up to satisfactory level, there is also high chance for him to be dismissed from the work.

There are different rules in different countries to follow for business owners. In case if an employee feels that he/she is given unfair dismissal, he may take the business in court. It is because companies fulfill the legal formalities while dismissing their employees.  


Sometimes, employees lose their job, not because of unsatisfactory performance but their organization doesn’t need their jobs anymore. This situation is commonly known as redundancy. 

Sometimes business organizations face these situations. If the sale of any product is falling for many years and the organization decides to shut down the production of that product, the production staff, sales, and marketing staff and staff related to that product will become a burden on the organization. In this case, the organization will lay off his extra staff while there is no issue of performance.  Some of the employees are adjusted in other departments but most of the employees are laid off in this situation.      

Downsizing Workforce Scenarios 

Sometimes it becomes necessary for the business organizations to reduce the number of employees. There could be various reasons to do so. We can have an example of a manufacturing firm where the number of employees are working in the packaging department. If higher management decides to automate the packaging department then there will be no need for most of the employees. 

In the same way, we can have an example of an FMCG company that observes the decline in sales in the last few years. The decline in sales is due to many reasons like an increase in prices, an increase in competition due to new products in the same category, etc. The company will ultimately decide to stop the production of that particular product and the employees working in the production, sales and marketing departments will become a burden on the company. It is expected that most of the employees will be laid off from the job.   

Justification While Downsizing Staff

When organizations take decisions to downsize the staff, they consider some factors before taking any action. 

Tenure Of Working

Those employees who have been working in the organization for a long time, tried to retained as they are experienced and especially, if the redundancy is paid. 


If the employees are skilled and proved themselves as an asset for the organization, are tried to retain for other projects if one project or production unit is being closed.

Employment History

If employee has good history like no late comings, no uninformed leaves, good behavior, etc. is tried to retain.

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