Downsizing would require the company to lay off a significantly large number of its employees while manage the change of operating on a smaller scale with a limited budget.
The company would face many issues as well which pertain to managing the commitment, job satisfaction, and the motivation level of the employees as well as manage operations on a restricted scale and budget. Conceptual studies have also highlighted that the overall reputation of a company is also significantly effected by downsizing action. Aside from this downsizing will also have adverse effects in terms of effecting the reputation of the XYZ Company. “Downsizing seems to have a negative impact on the firm’s RCSP, when one takes into account the kind of managerial action that led to downsizing (layoffs and/or divestitures), this impact differs between the two stakeholder groups, industry executives and financial analysts” (Zyglidopoulos, 2004). The reputation of the company gets a more significant set back when the profits and the financial position of the company in question is high in the years prior to the downsizing activity as in the case with XYZ Company.
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