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The Best Way to Lead Organizational Rightsizing

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 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.

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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

  1. Define

  2. Analyze

  3. 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, a