Similar to mergers, corporate restructuring is also an explanation for organizational downsizing. During corporate restructuring, companies make an effort to improve efficiency, productivity and lower cost. Reformation of an industry usually requires that some portion of the company be eliminated. As a result, a fraction of the employees are extinguished. This type of turnover customarily requires a substantial amount of planning and therefore provides employees with the knowledge that job shrinkage is to be anticipated. Once the sector of the company phases out, employees with seniority are typically moved to another department; as a result, these employees have to undergo training for their new job and management duties are shifted to accommodate the remaining workers. These motives for downsizing occur in corporations that are making an effort to increase profit and decrease inefficiency. The reasons mentioned are widely seen as respectable initiatives for downsizing. However, there are other reasons underlying corporate downsizing that are not as appealing.
Strategic planning is essential to ensure a profitable business. It involves ensuring that managers and subordinates have a common goal, providing ways to adjust to a changing environment, setting realistic goals and ways to obtain those goals, and making the best decisions for the organization as a whole. A lack of strategic planning within organizations makes cut backs inevitable. Poor strategic planning deals with the way top managers supervise the determinants of business profit. This type of downsizing potentially leads to companies shutting down, declaring bankruptcy, and dealing with various legal concerns. In addition, it leads to hostile takeovers and in some cases paves the way for mergers.
In the event that economic growth is slow, downsizing usually transpires. One specific example of this sort of decrease in employment is depicted in the massive loss of jobs that have occurred since September 11, 2001.