| These days, most companies are looking for | | | | conduct Top Performer Profiling (TPP) so that |
| ways to save money, and downsizing is one | | | | they understand what distinguishes high |
| obvious option. The magic number for layoffs | | | | performers from average ones. Top Performer |
| seems to be about 10 percent; companies feel | | | | Profiling involves looking at the three areas that |
| they can cut this number of staff as a quick way | | | | lead to high performance: |
| to boost profitability. But downsizing has a lot of | | | | 1) Knowledge & experience, |
| risks: people get demotivated, they become | | | | 2) Skills & abilities, and; |
| anxious, and some will even jump ship thinking | | | | 3) Behaviours & characteristics. |
| another organization is more secure. On top of | | | | Once a company has determined what mix of |
| this, companies may find themselves with too | | | | attributes leads to success it can rate people |
| little talent to bring in new revenue and provide | | | | against that profile. |
| the level of service needed to retain existing | | | | If the organization has been conducting Top |
| clients. | | | | Performer Profiling then they will already know |
| When Drake's HR consulting group talks about | | | | which people they can afford to let go. However, |
| 'rightsizing' we are not using a pleasant euphemism | | | | even in the absence of having done this sort of |
| for job cuts; we are talking about a disciplined | | | | analysis in a rigorous way, companies should bring |
| process that will improve an organization's | | | | in an HR consulting group to help them through |
| profitability. Effective rightsizing focuses on | | | | the thinking process of identifying who to let go. |
| creating success and avoids the dangerous | | | | It's important to remember that in rightsizing the |
| downward momentum that can come from | | | | goal is not to just cut headcount - it's to improve |
| poorly planned downsizing. | | | | profitability. Unless you have a good process for |
| How Much Can You Safely Cut? | | | | deciding who to keep and who to let go, this end |
| If your company has decided to reduce staff | | | | result won't be achieved. |
| levels, the question becomes how many people | | | | Follow-Through: From Downsizing to Success |
| you can safely cut? Far too often companies | | | | Any sort of downsizing, even a well run rightsizing |
| take an accounting driven approach: 'We need to | | | | process, requires that the HR consulting group |
| save $2.5 million, which means we ought to cut 12 | | | | uses good change management practices. First |
| percent of payroll.' The trouble is that cutting that | | | | and foremost there has to be a great deal of |
| many staff may lead to reductions in revenue | | | | communication. Experience has shown senior |
| that completely undermine the cost savings. The | | | | management consistently underestimate how |
| solution is to analyse operations before making | | | | much communication is required. People need to |
| any decision on the number of staff to cut. | | | | understand what is happening, how it will make |
| Drake's HR consulting group believes the safest | | | | the company stronger, and what it means to |
| route to rightsizing is through workforce | | | | them. |
| optimization (see Vol. 14. Optimize Workforce | | | | One of the important aspects of communication is |
| Planning - A little planning eliminates a lot of panic). | | | | that the leadership has to show it is competent |
| When organizations conduct a workforce | | | | and is leading the company to a better future. |
| optimization analysis they look at the annual | | | | This is one of the benefits of rightsizing as |
| fluctuations in workload. Once the minimum and | | | | opposed to a downsizing. If employees see that |
| maximum workloads are known, they can better | | | | management is taking a thoughtful approach to |
| determine how many permanent staff is required | | | | workforce optimization they will feel much more |
| to handle the ongoing workload and then plan to | | | | confident about the leadership than if all they see |
| handle the peaks in workload by using temporary | | | | is a sharp round of layoffs. The company needs |
| staff. | | | | to be explicit in what organizational changes are |
| With this approach you know the minimum | | | | being made to accommodate the fact that it will |
| number of permanent staff required and can be | | | | have less headcount, but the same amount of |
| confident there will be no impairment of your | | | | work. |
| organization's ability to generate revenue since | | | | Alternatives to Downsizing |
| temporary staff can provide sufficient numbers | | | | At this point we hope you see how rightsizing can |
| to meet customer needs. The trick here is to | | | | cut costs in a way that leads to greater success. |
| work with a staffing agency that understands the | | | | We also hope that you recognize the risks of |
| type of work to be done and can provide trained | | | | downsizing and understand that if it's badly done it |
| people with the right skills and the right cultural fit. | | | | will hurt the company. |
| Some people think HR's role in rightsizing is just to | | | | Remember that the goal is to improve profitability. |
| handle terminations. A good HR consulting group | | | | You can improve profitability by reducing costs or |
| will add value to the decision making process by | | | | increasing revenue. Often cutting headcount |
| providing an operational analysis. It's that analysis | | | | seems like the easiest thing to do. Regrettably |
| that lets you know where you can safely make | | | | the income statement makes no distinction |
| cuts and where a staffing agency can be used to | | | | between unnecessary costs and the costs that |
| fill in any gaps caused by fluctuations in demand. | | | | lead to revenue generation. If you cut the wrong |
| Who Can Be Let Go? | | | | costs you damage revenue and that leads to |
| Once a company has done the operational | | | | lower profitability. So before resorting to drastic |
| analysis that tells them how much to cut, the | | | | downsizing companies should consider programs |
| next question is who to keep and who to let go. | | | | such as: |
| How do companies make this decision? Circuit City | | | | Salary cuts and bonus program elimination |
| infamously made the decision to cut its | | | | modification |
| experienced staff since they were more | | | | Reduced benefits programs |
| expensive-a move that led to no end of bad | | | | Reduced facilities cost (rents, utilities, etc.) |
| publicity and a decline in the ability to serve | | | | Reduced travel (through leveraging Web |
| customers on the sales floor. More traditionally, | | | | conferencing and other technologies) |
| companies let go of those most recently hired | | | | More importantly, new revenue initiatives should |
| and keep long tenure staff. Another popular | | | | also be considered, such as: |
| method is to share the pain by insisting that | | | | New product offerings |
| every department cut a couple of people. | | | | New markets/applications for existing products |
| Unfortunately, none of these decision rules do | | | | Price increases |
| anything to guarantee that the company will be | | | | Expanding into new geographical markets |
| positioned to achieve profitability after the job | | | | A downturn is a time to be smart about cutting |
| cuts. | | | | costs and creative about increasing revenues. |
| Clearly, the smart thing to do is to keep your | | | | Drake's HR consulting team knows how to ensure |
| best performers. To do this you need a reliable | | | | that if you do cut staff, you do so in a way that |
| method to identify them. Drake's HR consulting | | | | makes your company stronger. |
| group has long been encouraging companies to | | | | |