Cost Reduction and Control Best Practices: The Best Ways for a Financial Manager to Save Money, 2nd Edition

Chapter 14

Downsizing

BEST PRACTICES

DOWNSIZING AT ALL SIZES OF FIRMS

Nearly half (44.7%) of all organizations in IOMA’s outsourcing questionnaire, Best Practices in Outsourcing, Downsizing and Use of Consultants, reported that they have intentionally reduced the number of employees in their organizations in the past two years. However, recent downsizings are affecting a much smaller number of employees at each firm than in years past. The other striking finding of the study is that it is not just large organizations that are taking advantage of the immediate bottom-line boost of reductions in workforce: 43.1% of small- to medium-size organizations (up to 500 employees) and 47.8% of larger (more than 500 employees) have downsized (see Exhibit 14.1).

Exhibit 14.1 Organizations That Have Downsized in the Past Two Years, by Company Size

Several large companies have only announced job cuts in the past year or so. Health products manufacturer Baxter International Inc. announced plans in April 2004 to reduce its payroll by nearly 4,000 jobs, an 8% reduction in its global work-force, in an effort to control costs and maximize profit margins. This is the second major round of layoffs announced by Baxter in the last year. Nine months earlier, the company said it would be removing approximately 3,000 employees from its payroll.

In a similar announcement, also in April 2004, Bank of America ...