Downsizing: measuring the costs of failure

A five‐year review of the literature on the management practice of downsizing and its related costs published between 1994 and 1998 is used to analyze the positive and negative outcomes attributable to downsizing. The article examines downsizing to assess its impact on both the individual employee (the human element) and on the organization (the business factor). It is recognized that some degree of downsizing was inevitable over the last 20 years due to technological advances, business process reengineering, and a trend of cost‐cutting brought on by economic downturn and a globalization of the economy. Nevertheless, poor implementation of downsizing strategies by unprepared and unskilled managers, working in a vacuum of political leadership, made the experience worse than it needed to be. It was concluded that, although there can be many positive outcomes to a downsizing project, in the end the negative outcomes outweigh the positive.