• Friday, March 29, 2024
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BusinessDay

Downsizing and Rightsizing

organisation

We have been in this Covid-19 depression for well over a year now. Many businesses have shut down and many more are struggling and many are having their best years. Where are you?

Many have had to downsize because the economy has been shut and is just opening up again even though there is still a lot of uncertainty with governments shutting and opening the economy as they deem fit.

There may be other reasons to downsize like office closure or business acquisition. And unlike common belief, it typically has nothing to do with employees’ performance. Rather, it’s a strategic business move to cut operational costs, maximize production, and increase profit.

When there is downsizing, HRM is usually in the forefront making it work. HRM has to be prepared to properly plan, manage, and execute workforce reductions when the time comes. How should HRM handle corporate downsizing while maintaining a strong corporate image and making the process as stress-free as possible for displaced employees?

The strategic planning process can be quite complex. HRM needs to identify the problems that workforce reductions are expected to solve, develop reliable selection criteria, and consider how the layoffs will impact the company as a whole in the long run.

For instance, how will the workload be distributed among remaining employees without productivity levels dropping and critical business functions ceasing? Sometimes the organisation may need to ask three people to leave and hire one person with the required skill set to replace them. HRM will have to re-do job descriptions and be sure no job falls in the crack.

HRM must analyse departments and internal functions to determine which are critical and which employees are crucial to their execution. This is to ensure productivity levels are kept high. HRM must work closely with management teams to gain insight into day-to-day functions. Cross-departmental communication is central to conducting layoffs without destabilising key business functions.

Communicating and cooperating with executives, managers, and accountants is essential to the decision-making process. Decisions on who will be laid off, how much notice will be given, and what kind of outplacement support will be offered to displaced employees if any.

HRM should explore other staff reduction methods before settling on corporate downsizing, for example, Motivate employees to volunteer to leave the organization with incentives like outplacement and severance pay. Offer early retirement to eligible employees with financial incentives.

Select employees to go on temporary, unpaid leave until financial crises pass. Stop hiring for non-critical positions for business to continue. Finally reduce pay rates, fringe benefits, or work hours of willing employees.

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Developing Selection Criteria is probably the single most important and difficult process of corporate downsizing. HRM must develop criteria to ensure the layoff process is fair, objective, and in the organisation’s best interest.

HRM can consider the seniority criteria. The rule here is that the last to join is the first to go. This is a great way to protect yourself against discrimination suits and it simplifies the layoff process. The risk is laying off employees that are a huge company asset.

The employee status criteria. This means full-time employees remain over part-time and contract employees. This keeps the employer brand intact as these contractual roles are usually considered more expendable. However, if your business relies on outsourcing, then this might not be the best solution. Outsourcing itself is actually a good solution when things are tight.

The performance criteria. Selecting employees based on their performance is usually the most used since this means weak talent will be let go of. This should be good if your performance management system has been good and consistent, not subjective.

The Skills criteria. Choose between employees based on their skill set. Namely, distinguish between skills that are pivotal to your company’s success and skills that are not. By doing so, you get to retain top talent without sacrificing quality.

The most effective selection method is actually multiple selection criteria. Create a list of criteria with different weights that best meet your company downsizing goals. Then rank employees according to these criteria. The ones with the lowest ‘score’ will be laid off. It’s a combination of the previous selection methods but customized to fit your organization’s needs.

Each method has its own shortcomings, and what might work for one organization might not necessarily work for another. Be very intentional about your outcome and choose the selection criteria with insight.

Have a great weekend as usual. We are coming out of lockdown and covid19 seems mostly to be dying out. This is a time to do things better than in the past.

Let us purpose to do this and start with our Human Resource Management.