Downsizing the firm: Answering the strategic questions

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Abstract
Though downsizing has become a routine activity, most of what has been written relies on anecdotal evidence and focuses primarily on personnel issues. To make good downsizing decisions, executives need to appreciate more than just the immediate impact on human resources. And their information should be based on the collective experience of many firms. In this article, we raise five important strategic questions about downsizing and provide answers based on analyses of 100 downsizing firms. We show that downsizing has the potential to be beneficial to healthy and declining firms in a variety of industries. Those firms that are the most successful downsizers tend to use the process strategically to refocus on related business activities. Done strategically, even modest cuts have positive impact.

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