The recent announcement of Peloton laying off 2800 employees again sheds light on the pervasive organizational phenomenon of downsizing. Whatever euphuism is used (rightsizing, restructuring, and yes even smart sizing), downsizing is often the pain experienced by employees for the missteps of management. This is not to say that cost cutting by downsizing per se is wrong for the long term viability of the organization, but rather, the way in which downsizing is done has a huge impact on whether such an initiative can be deemed a success.
Far from thinking just about the potential cost savings from letting a certain percentage of the workforce go, firms need to the think deeply about lost knowledge, the morale and motivation of those who remain (survivors), the perceptions of the market place, as well as the impact on the customer and the ability of the company to deliver on its value proposition (or changing proposition). In addition, the firm should think seriously about the impact on those let go and how they are treated. Not only for human reasons but also for the very real likelihood that the organization will look to re-hire many of these same people should performance improve (there is wealth of research which shows this is often the case as firms yo-yo from hiring to firing in short term reactions to the market).
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Strategy & Competitiveness 