Now more than ever before, we read about companies downsizing and reducing the number of their staff due to economic challenges and other plans the companies may have to sustain their revenue. It has become even more necessary to downsize seeing how some companies try to keep their business thriving.
Corporate downsizing is the intentional reduction of a company’s workforce, operations, or assets to improve efficiency, reduce costs, and increase profitability.
Downsizing can involve the form of layoffs, mergers, acquisitions, or the sale of non-core businesses. Corporate restructuring, on the other hand, involves a fundamental transformation of a company’s organization, operations, or strategy to adapt to changing market conditions, improve competitiveness, or recover from financial distress.
Is Downsizing a Necessary Mistake or Strategy?
Corporate downsizing and restructuring can be a necessary strategy for companies facing financial difficulties, increased competition, or changing market conditions. In Nigeria, for instance, many companies have had to restructure or downsize in response to the country’s economic downturn, including the challenges of 2020.
During the period of the 2020 challenges, we saw how the aviation industry was hit globally. Pilots were laid off. While we have seen some countries and regions recovering from the challenges in the industry, others are yet to fully recover. Corporate downsizing can be a mistake if not implemented carefully.
In Nigeria, mass layoffs have led to social and economic instability, particularly in industries such as manufacturing and oil and gas. In addition, downsizing can damage a company’s reputation, lead to a loss of talent and expertise, and create uncertainty among remaining employees.
Corporate downsizing and restructuring require careful planning and execution. Human resources play a critical role in communicating the reasons for downsizing, managing the layoff process, and supporting affected employees. In doing this, the labour laws and regulations are navigated with utmost professionalism. The complexities in navigating these laws can sometimes make it challenging to implement downsizing and restructuring initiatives.
Corporate Restructuring and Downsizing for Popular Brands in Nigeria
Despite the challenges, corporate downsizing and restructuring is sometimes deemed necessary, given the competitive business environment these brands find themselves. Brands such as MTN, Dangote, and First Bank have all undergone significant restructuring initiatives in recent years.
These processes and initiatives adopted have helped them remain competitive and adapt to changing market conditions. Today, not only these popular brands are using restructuring and downsizing to remain competitive, even technology companies whose workforce are largely remote workers now see the need for corporate restructuring and downsizing.
As companies also adopt new technologies and ways of doing business, they may need to reduce their workforce or restructure their operations to remain competitive.
Corporate restructuring and downsizing are quite sensitive that basically demands careful consideration and planning. While they have proven to be a necessary strategy for companies facing financial or competitive challenges, they must be implemented in a way that minimises harm to employees and stakeholders.
In implementing these initiatives, human resources play a significant role in navigating the complexities of corporate downsizing and restructuring, and are supporting companies as they adapt to changing market conditions and the realities of today’s economy.
