Concern has grown for decades about employment displacements that would occur as expanding, evolving technology impacted business. Apparently, few corporate and political leaders were listening. Had the message been heard, we might have developed a proactive, national retraining and retooling program to help displaced workers prepare for the changing economic scene. If this movement continues, we may witness, in this society, a crisis of confidence unprecedented in our history. While many corporations have gone the downsizing route, this reactive cost containment strategy creates merely a short-term illusion of profitability.
Stocks usually increase in value and major stockholders certainly become wealthier.
But the long-term consequences of downsizing leave much room for questioning the sanity of the method. In looking at the downsizing literature, there is little, if any, good research that suggests that downsizing affords long-term performance benefits or sustained competitive advantage. The costs associated with downsizing are great and leave a lasting effect on those who are displaced, and on those who survive, a downsizing. Let's consider just a few of the negative consequences. First and foremost, downsizing erodes, if not eradicates, trust within an organization.