The Best Way to Lead Organizational Rightsizing

Kathy Krul-Manor
Feb 9, 2023
9 min read

Updated: Jul 1, 2023

Layoffs should be the last resort for companies that need to pivot in response to marketplace changes, this blog offers alternatives for both short-term and longer-term approaches to workforce management.

It’s impossible to miss the headlines regarding recent layoffs and reduction in force activities taking place. It’s not just impacting technology companies and it’s not likely to end soon. Shifts in consumer behaviors, inflation, and ongoing supply chain issues are some of the reasons why we are seeing companies making the choice to lay off their employees.

Layoffs are difficult for the impacted individuals, managers delivering the message, HR teams driving the process, or leaders making the ultimate decisions. There are companies that get it right but many more get it wrong.

There is a better way to manage this process.

In this blog, I will provide a framework for organizational rightsizing for today’s economic environment and several long-term strategies to adopt in order to create a more sustainable workforce solution.

Definitions of Downsizing and Rightsizing

Let’s start with what these terms actually mean. According to Merrian-Webster.com the two terms are defined as:

Layoffs are generally considered a separation from employment due to a lack of work available and are temporary in nature to help the business get through economic challenges but with the intention of bringing the employee back. Reduction in force (RIF) is a permanent layoff.

For the sake of clarity, let’s assume the newsworthy events of late are rightsizing endeavors with permanent headcount reductions. Now, let’s dive into the best way to rightsize an organization.

Addressing Immediate Needs to Rightsize

In my experience, companies that take a strategic approach about their options during difficult times invoke greater loyalty from their employees, investors, and customers. For example, implementing a hiring freeze can have a significant impact on the bottom line and can save jobs. If communicated appropriately and managed professionally, a hard-line on hiring could create the space a company needs to move forward.

When your company is faced with making difficult financial decisions, the first avenue to consider is if you have the right strategy and the right team to drive the results you need to achieve. Take this opportunity to do a deep dive into the performance and skills of the team. If there are team members who are not performing to expectations, or exhibiting behaviors that are contrary to the organizational culture and values, use this time to make a change. In my experience, many companies struggle with performance management and toxic behaviors.

Not addressing performance issues can have a very negative effect on company culture - it can create resentment, disengaged employees, attrition, and in many cases, health issues that lead to a lack of productivity or even medical leaves. Get in front of this before the situation becomes overwhelming and a larger RIF is needed.

Other options include providing employees the choice of taking pay cuts, sabbaticals, or furloughs. Pay cuts are tricky and I recommend starting with executives and top-level managers before impacting the rest of the employee population. Always consult the Chief HR leader or legal counsel to ensure these actions are done in an equitable and non-discriminatory manner.

If these measures are not enough to create the desired outcome, here are several other options to ensure the process is handled in the best, most respectful way possible.

Design a New Structure - Have each department create a new organizational chart that highlights the skills and capabilities needed to fill each 'box' on the chart. When multiple departments are involved, assign a Resource Manager to capture the profiles of existing employees and conduct as much 'match-making' as possible.
Engage Managers - Work closely with managers and supervisors to gain a better sense of current skills, capabilities, potential and career aspirations. Take the time to consider what existing employees can fill those ‘boxes’ and offer them an opportunity to move into a new role or project team.
Be Respectful - Do everything possible to avoid layoff conversations on Fridays, this may be my old-school mentality but having an employee feeling alone and unsupported over the weekend is not the right approach. In addition, each impacted employee should be personally informed by a manager and/or a member of the HR team. No employee should find out that they have been impacted by a reduction in force through an email or by the inability to access work systems. This can be traumatic for the individual and it will negatively impact the company brand and reputation.
Post New Opportunities - There may be some individuals who are not obvious matches within the new organizational structure. To support employees in this scenario, be sure to post and share the new opportunities internally as part of the rightsizing activities. If you do not have an internal posting process yet, create one and launch it as soon as possible.
Communicate, Communicate, Communicate - Do this early and often and with as much transparency as possible in order to empower the impacted employees. Engage employees to apply for new opportunities that align with their skills, capabilities and desired career path, both within their department and across the organization.

Provide the impacted employees with the right support to ensure they are set up for success in the future. For example, offer outplacement counseling and career coaching, leverage an Employee Assistance Program (EAP) for mental health support, etc. Ensure all managers are trained to answer questions and are fully prepared to deliver any messaging, they should be confident enough to clearly and confidently articulate the company’s position on the recent organizational changes.

And finally, I find that many companies forget about the employees who remain with the organization post-rightsizing, they are going to require support as well. Remember that this is the team that will be taking on new and/or additional duties as a result of the reduction in headcount.

There are ways to support remaining employees after any workforce changes that take place - survivor’s guilt is real.

Building an Agile Workforce

Building a more agile, skills and capabilities-based organization will create an opportunity to pivot quickly and leverage various types of workers to achieve organizational goals. Ultimately, if this is done right there will be less of a need to conduct large layoffs or downsizing and employees will be more productive and happy.

There are 3 steps to this process

Define
Analyze
Create

DEFINE: Future Direction of the Organization

For those of you who are familiar with ‘strategic workforce planning’, you know the first step in the process is to consider business strategy. The overall strategy will be used to inform and guide future decisions in order to determine what skills and capabilities will be needed to achieve organizational objectives.

Ask yourself:

What direction do you see the business going in?
What challenges do you anticipate that may potentially arise?
What areas of the business are struggling and have not yet been addressed?
What, if any, areas of the business need to scale quickly or pivot in a new direction?

As you consider these and other questions, it’s important to remember that employees are a company’s greatest asset. Having the right people in the right places is key to organizational success - aligning a workforce to support strategic goals and objectives, and having the ability to pivot or reallocate those resources as needed, is critical.

Once the strategic direction has been set, it’s time to conduct a deep dive on what skills and capabilities are required to drive the overall strategy. Some skills that used to be important for business success may no longer be critical due to the shift in strategy or priorities.

This is where most organizations encounter challenges, resulting in mass reductions in force, whilst having open positions posted online for all to see. A very astute colleague of mine referenced this outcome as a ‘Culture Killer’...and I agree. Companies that plan ahead, and know what skills and capabilities are required to sustain the business long-term, will be one step ahead of the competition.

Do you know the full extent of your current internal talent pool - technical skills, human capabilities, degree of potential, key strengths, and career goals? If the answer is ‘no’, keep reading…

ANALYZE: Conduct a Skills-Gap Analysis

What is a ‘skills-based approach’? Essentially, it’s a shift in how an organization views jobs versus the work required resulting in a ‘decoupling’ of some work from a particular job. Most employees are defined by their job or title, whereas, taking a skills-based approach enables people to be seen as whole individuals with skills and capabilities that can be redeployed based on business needs.

Many organizations do not have a clear view on the skills, capabilities and potential of its talent. In fact, a large percentage of Executives recognize the value in creating a skills-based approach, however, fewer than one in five are adopting skills-based approaches to a significant extent. In the current talent marketplace, no organization can afford to lose top talent or negatively impact their reputation. Get ahead of the competition, now.

Information to capture in the skills-gaps analysis includes:

Identify the skills needed as well as the level of proficiency required - This should include Human skills (e.g., communication, adaptability, growth mindset, problem solving) as well as Technical skills (e.g., data analysis, UX design, coding, financial management, web development). Level of proficiency can be assessed as basic, intermediate, or advanced. My recommendation is to source a library of skills/competencies to support the analysis and identify which skills and capabilities are top priority.
Measure the skills that currently exist - There are a variety of ways to access skills information such as performance reviews, skills self-assessments, manager interviews, or behavioral assessments. Here is a skills-gaps analysis checklist and template to help guide this activity.
Address skills gaps - The question of whether to Build, Buy, or Borrow talent is now going to be top of mind as you determine how best to fill in the identified gaps. Build through mentoring, training, or new assignments, borrow contractors and freelancers for specific niche skills and/or specific projects. Buying talent through external hiring is an option, however, this should be the last resort because most employees are keen to learn and grow with the company.

For organizations that already have a relatively robust HRIS, some skills-based information may already exist. This is a good starting point, however, let's raise the bar by gathering more information through talent profiles, resume analysis, as well as manager inputs on current employee skills. Even better would be to enable employees to build their own talent profiles and, as mentioned, a self-assessment that captures current skills and career aspirations!

Many of today’s HRIS platforms have talent profile options to capture skills and capabilities (Workday, for example) as well as talent review modules that support assessing potential. You can also consider SkillDirector, a tool that is able to analyze skills gaps within the organization and help employees learn new skills that align with company strategy and direction.

Leveraging AI as part of these efforts will be essential as you work to align existing skills within the organization with skills needed for the future. Platforms such as eightfold.ai can support efforts to capture skills, analyze potential, and redeploy talent whose jobs may be impacted by possible rightsizing activities.

"Companies should view themselves as an ecosystem of talent. This ecosystem is full of dynamic individuals who add significant value to an organization through their unique talents, strengths, skills, potential, and diversity of thought".

CREATE: Internal Talent Marketplace

Traditional approaches to talent acquisition are focused on sourcing externally. Moving forward, this approach will not provide the desired results for most organizations. The War on Talent continues to exist and companies need to adopt more agility around the concept of Build, Buy or Borrow talent.

What is an Internal Talent Marketplace, anyway? According to BetterUp, it is an internal system within an organization focused on developing talent. Companies will be able to post projects, new roles, mentoring opportunities whilst enabling employees to promote their skills and pursue new career paths.

The reality is that the New World of Work is already demanding this shift in mindset - according to the World Economic Forum:

Future of Jobs Report, 2020

This is a shocking statistic and requires a shift in mindset around talent acquisition and management, as well as embracing technology to enable this new approach. More innovative, or non-traditional approaches will be critical such as considering contract or freelance talent to fill shorter-term projects, adapting to a more agile workforce and embracing a culture of learning and up-skilling.

Unilever has taken major steps in the right direction by committing to up-skilling their employees for the future, they wanted to equip their employees with the knowledge needed to thrive in the next chapter of work. You may be wondering, ‘how does a talent marketplace benefit the organization’?

There are several compelling reasons to move in this direction, including:

Decreases employee attrition - By providing increased internal opportunities to grow, retention of top talent is more likely.
Increases levels of engagement - Employees want to learn and grow, they will be happier and feel a greater sense of connection to the organization resulting in higher engagement.
Addresses talent gaps - Every business has staffing needs, a talent marketplace reduces the tension of those gaps by fulfilling immediate and longer-term business needs.
Creates a high-performance culture - Teams will be continuously learning and growing which, in turn, will enhance organizational capabilities, culture, and overall productivity.

In Closing…

When companies are faced with making difficult decisions, the process is never easy regardless of what approach is taken. If the company needs to rightsize, speak with the Chief HR Officer or legal counsel to devise a plan that offers impacted individuals with options and leaves them feeling valued and respected.

To prepare your organization for the New World of Work, take steps now to create a more sustainable workforce solution. Creating an internal talent marketplace, consider building talent first, borrow to fill in critical skills gaps and to lean into project work, and buy in alignment with the core values and future needs of the organization.