Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is a potential effect of downsizing in a company?

1. Improved employee morale

2. Reduced diversity in the workforce

3. Increased operational complexity

4. Outsourced job functions

The correct answer is: Reduced diversity in the workforce

Downsizing can often lead to reduced diversity in the workforce. When a company decides to downsize, it typically involves cutting jobs to reduce costs, and this process can disproportionately affect certain demographic groups. For instance, if layoffs are more likely to occur among specific departments or roles that are already less diverse, this can result in a workforce that is less representative of various cultures, ethnicities, and backgrounds. Concerning the other options, improved employee morale is unlikely as layoffs typically create an atmosphere of uncertainty and fear among remaining employees. Increased operational complexity can also arise from downsizing, but changes are generally aimed at streamlining operations rather than complicating them. While functions may be outsourced as part of a downsizing strategy, this is not an inherent effect of downsizing itself, and it varies based on the company’s specific approach to its workforce structure.