If You Must Downsize: How to Maximize Return on People

Downsizing may reduce costs, but it won’t increase your return on people.  In fact, layoffs usually have a negative impact on productivity, morale, employee satisfaction, external reputation, and even the quality of your workforce.
It doesn’t have to be that way.  Follow these tips to overcome the negatives and get a greater return:
1.  Be smart about who is on the layoff list.  Many companies will make downsizing lists by seniority or by some percentage staff reduction in every department.  These approaches increase the risk of cutting good performers or destroying value chains.  Instead, take extra time to understand what drives value in your core processes.  Choose layoff candidates based on the least impact to operations and customer service.
Performance documentation can be valuable in making these selections.  but they can also be worthless, or even completely misleading.  Many performance appraisal processes reflect the manager’s attempt to secure the best pay increases, or to be used as a tool to play favorites.  As a result, they have little relationship to real performance.  If that’s the case, you need a better approach — and fast.
2.  Redesign jobs to make them more stimulating and streamline cross-functional processes to improve collaboration.  Typically, a company will reduce headcount and then expect everything to work the same way, but with fewer people.  What actually happens is additional tasks are assigned to the remaining employees, overloading them and reducing productivity.  Instead, take this opportunity to make jobs more engaging by redesigning roles and responsibilities to increase the freedom to act and level of responsibility.  And look for ways to improve cross-functional processes.  This improves efficiencies and collaboration, and it makes the remaining jobs far more engaging.  You’ll enable high performers to focus more on the work that needs to be done.
3.  Don’t stop investing in your people.  We know that learning and development are imporatnt to employee engagement and retention.  But much of the training in organizations is wasted because it does not measurably improve performance.  Strip out all training and development not related to building skills and knowledge that will affect current or future performance capabilities.  Consider using senior leaders to do training.  This reduces outside costs and ensures that training is connected to actual work challenges.
4.  Keep communicating.  Now more than ever you need to be keeping people informed.  There are two sources of stress: One, not knowing what will happen tomorrow, and two, having no control or influence over it.  Be upfront and candid about the situation and what needs to be accomplished.  You need to maintain the morale and productivity of existing employees, and they’re hungry to know what you’re thinking about.
5.  Track important measures.  Headcount and cost reduction are good, but you also need productivity.  Track efficiencies, cross-functional alignment, collaboration, employee morale, and voluntary turnover of high performers.  Additionally, you should be able to increase the quality of any new hires during this time.
The value of doing this well is substantial and includes:

  • Increased workforce productivity and satisfaction
  • Improved efficiencies and collaboration
  • Strengthened ability to attract and retain quality talent
  • Better positioning for growth
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