Things to keep in mind while downsizing your workforce

A quick look at how HR managers and leaders should approach the challenging process of downsizing their workforce.

The employment landscape, both in India and across the world, has started witnessing some realignments due to the current slowdown-induced global economic scenario. Add to that the surge in the usage of digital technologies such as artificial intelligence (AI), machine learning (ML) robotics and automation, and you have the recipe for disruption and volatility. A harsh reality of these disruptions is the fact that the spate of transformation in various job sectors usually starts with downsizing the workforce. The process is usually termed as rightsizing or resource rationalization to take the negative connotation out of it.

And, following the mandate of the management, the person who initiates the process on the ground is the HR manager. For the manager, executing the downsizing process is a challenge in itself. Broaching the subject and ultimately letting go of some productive and committed employees because their roles have become either redundant or financially burdensome are the true test of HR skills and experiences. Nevertheless, if downsizing has been decided as the way forward to streamline operational overheads, HR managers have to get their acts together. Let’s go through the steps a manager must follow to see through this challenging process.

First of all, an HR manager should treat the employees who have been laid off with compassion and respect. It’s a life-changing development in their lives and they will be extremely concerned about finding a new job and fulfilling financial commitments to their families. So, an HR manager should empathize with the situations they are in and show compassion towards them. Moreover, the behavior towards the laid-off employees during the termination process must be respectful. It’s upsetting for an employee to have been poorly-treated and insensitively during the layoff process. Giving cold shoulder at a time when an employee is one their way due to retrenchment creates unnecessary complications during the full and final settlement with them. These sometimes go to the extent that employees end up filing lawsuits against their employer on various grounds.    

Secondly, one has to be transparent while interacting with the employees who have been laid off. It’s a fact that being laid off is not a statement on their skills, abilities, and experiences. So, it advisable that the HR manager should have an open discussion with the employees on the reasons which led the company to retrench the workforce. It will help them understand the phase the company or the employer is going through and plan their next career move better. In addition, the employer should extend cooperation in helping the employees find employment in the same sector or other sectors by offering references or additional assistance.  

Another significant challenge of the HR manager is keeping the morale of the employees intact who have escaped the downsizing process. Employee morale is a critical consideration that must be taken into account while retrenching. It’s vital to ensure that confidence is not affected significantly as it can cause the employee base to lose faith in the vision of the company, driving attrition in the broader employee base. The most appropriate way to address such a situation is to hold a meeting with the retained employees and discuss with the rationale of the downsizing exercise. The tone and approach to the meeting are essential to infuse confidence among the existing employees and provide them with an assurance of the future. The employer must be open in discussing future plans and take questions from the employees to allay their fears and apprehensions.

Having said that, while downsizing is regarded as the only viable option in cases of reducing business stress, workforce reorientation, and rationalization, it has several pros and cons both in the short and long term. Several studies have been conducted on the impact of downsizing in a company, and most of them have pointed out that more often than not, the consequences are negative, including a decline in profitability and, in some cases, bankruptcy. As a matter of fact, there are some negative consequences of downsizing that are unavoidable. So, leaders must ensure the company has the resources and ability to withstand the storm that downsizing inevitably causes to be able to benefit from the exercise.

Finally, a word of caution; downsizing shouldn’t be looked at as the only option. A long-term view on talent management and building programs that focus on talent up-gradation, reskilling, and leadership development opens up a new perspective on downsizing in rough economic conditions. Remember, the ramifications of downsizing extend far beyond the employees, and also leave a lasting impression on your business, employer brand, and market position.