Planning for downsizing
Plan for the downsizing so that you carry it out before it is forced on you. Downsizing should fit in with your company’s larger strategic goals. Identify the people who are essential for your long-term future. Make sure you know how your remaining team members will cover for those who leave.
Don’t put excessive pressure on employees to carry the workload of their former colleagues. Cutting to meet number targets can leave your business honeycombed with all sorts of weaknesses since key team members and skills disappear. You will find yourself scrambling to cover those weaknesses and putting unnecessary stress on your remaining team members.
Remain aware that your team members’ skills are company assets. Make sure you retain key skills.
Reassess the performance of your team members when you decide who to keep. Don’t use your regular performance review system for this purpose, as it will tarnish the process. It will make team members less likely to be open during their regular performance review.
Consider eliminating services or products that are underperforming. Consider focusing your company’s activities on core areas of expertise where you are most competitive.
Consult with your team members. Make them fully aware of the reasons behind the downsizing. Give them input into the way the downsizing will be carried out. Give them ongoing responsibility for achieving the business outcomes that you want to achieve through the downsizing. Empower them. This will be a good antidote to the stress, uncertainty, and anxiety that downsizing is likely to inspire.
Listen to customers and suppliers. Be aware of their needs and make sure that the downsizing won’t make it harder for you to meet those needs.
Analysing your business processes will enable you to identify unnecessary or redundant activities and eliminate them. You will need to find ways to measure how activities and processes are adding value to your business. This will show where you can rationalise processes, not just your workforce. You should see downsizing as a way to improve performance.
If you want to rationalise the business processes you need to map out the way your business works. You can do this using a combination of methods including Activity Based Costing and diagrams such as flow charts that show the stages of each process.
These processes are extremely effective in revealing exactly which products and processes are adding value and which aren’t – and so can be considered for elimination. They can also reveal the duplication of processes and waste of resources. But they require some degree of expertise to do well.
Alternatively, you might want to consider re-engineering, or outsourcing, some of the activities you currently perform yourself. This also requires detailed planning to establish the cost-effectiveness and reliability of alternative procurement processes, and how you will need to rearrange your internal processes once the others are removed. Outsourcing can have a major impact on customer relations if you can’t guarantee the quality and timeliness of delivery of the products or functions you are relying on someone else to provide.
Managing the process
‘Successful’ downsizing requires strong leadership and good communication. You can’t over-communicate when downsizing. Rumours will start circulating when downsizing is announced. Your team members will be susceptible to all sorts of fears and anxieties. Deal with this by giving and constantly reinforcing key information, such as the time frame for downsizing, your larger strategies, and various options for your team members.
Be visible and accessible to team members. Listen to and acknowledge their concerns - don’t minimise their feelings; show empathy. Reassure the team members who are going to remain - tell them why they are valuable, confirm their future with the company, and be clear about what you expect from them. Emphasise that downsizing is a positive business strategy and articulate your goals - present a vision for the business. Focus on the skills of the people you retain - offer them assistance and training where they face new challenges. Continue to recognise and reward team members for their good work
Look after the people who are going. Give them a fair warning of the downsizing so they will have time to arrange their affairs. You may want to offer retraining or outplacement.
Be aware that the team members who remain will watch the way you deal with those who leave. If you behave fairly and generously you can minimise damage to employee loyalty. Be aware that you may want to rehire the people you lay off, so treat them well. Some companies offer rehiring bonuses to team members they have had to let go.
Take care to respect the dignity of your team members. You may create a lot of bad ambassadors for your business since laid-off team members are likely to find jobs elsewhere and you don’t want them to be unnecessarily bitter and have a reason to undermine your reputation. Give your remaining team members time and space to deal with their emotions. They are likely to be feeling anger and grief at seeing friends lose their jobs, and may even be suffering ‘survivor guilt’ at being spared.
Make sure you are not over-representing minorities in the downsizing, as this could leave you open to litigation. Show fairness by eliminating positions at all levels of the company, including management. Do not announce pay increases or bonuses for management while other parts of the company are feeling pain.
There are other things you should remember not to do when downsizing. For example, don’t:
- Cut numbers repeatedly or make layoffs over a long period. Try to cut numbers once and decisively. Repeated or drawn-out downsizing will prolong the negativity and the threat to morale and productivity;
- Create expectations and not live up to them. Breaking commitments will worsen anxiety and uncertainty. You need to present an image of reliability and dependability;
- Keep decisions and policies secret. Secrecy will be counterproductive, as it will create a climate of suspicion.
When layoffs are announced, they need to be justified in clear and logical terms. The company needs to state a good business case for layoffs and stick consistently to it.
It’s important to ensure that layoffs are conducted legally. It’s worth seeking legal advice while formulating your policy and making sure that all procedures and paperwork are in order.
If several managers are involved with the layoffs they need to maintain a consistent position. There shouldn’t be any perception of favouritism or bias. One way of maintaining consistency is for layoffs to be announced to workers in a group, where questions can be dealt with publicly.
When the time comes to dismiss a team member it’s important to minimise the emotional stress involved. For example, it’s better to spare people the experience of sitting around and worrying if they are to be among the victims. Individuals should be informed of their position as soon as possible.
A meeting should be set up in a private place. At the same time, it may be useful to have a witness present, given that the meeting may have legal consequences. You might want to schedule a meeting early in the day so that the team members are not sitting around and stewing for hours. For the same reason, try not to leave people to worry over a weekend. If team members are starting to fear the worst, let them know the bad news as soon as possible.
When you have the meeting, get to the point quickly and clearly and state the reasons for the layoff. Listen to the team member’s response, but do not indicate that the decision is negotiable. Have notes ready - they should provide you with a checklist of essential points you need to cover.
Don’t be flippant or try to make light of the situation. Don’t minimise the amount of emotional pain the team member may be feeling. Don’t apologise, threaten, justify, argue, make promises, or take any anger personally.
Different people react differently to layoffs. They may be angry, stunned, tearful, relieved, or even elated. Be prepared for the range of reactions. It would be wise to have a security guard within earshot, given that reactions can sometimes be extremely hostile. However, the days of firing workers and having them marched out of the building by an armed guard are gone. That’s unnecessarily brutal and it will look bad to other team members.
Provide information materials for the team members to take away with them. Don’t drag the meeting on for longer than 15 minutes.
Have full details ready on essential topics such as when the last working day will be, if and how much severance pay there will be, when team members will receive their last pay, what references the company will provide, how the termination will be explained to colleagues and clients, what the implications are for KiwiSaver and any company superannuation or health insurance and any training or job search assistance the company will provide.
After the downsizing has taken place, you need to rebuild morale and team spirit. This involves making sure that everyone is clear about what their new job roles are. Communicate your vision for the company. Training, workshops, individual counselling, and interviews will help you do this.
Give team members space and time to deal with emotions such as anger and loss. Don’t load them up with any more stress than absolutely necessary. Reassure the remaining team members that their job is secure. Explain to them why they are valuable to the company. Try to rebuild their confidence and their sense of normalcy. Encourage and reward team members who need to learn new skills.
You also need to rebuild trust. This will be easier if the downsizing has been handled well, but could easily take a year to re-establish.
Continue looking for ways to streamline work processes. Where you have restructured, monitor your new business systems and fine-tune them.
Downsizing is an unpleasant business for all concerned, but if you manage it well you can minimise damage to morale and disruption to your business. While downsizing is likely to have short-term costs in terms of productivity, it may allow you to re-establish your business on more rational lines and increase your profits in the long term