The benefits of downsizing your business

There are often significant benefits for businesses that downsize, but only if the process is managed well, writes management specialist Karen Gately

The benefits of downsizing your business

There are often significant benefits for businesses that downsize, but only if the process is managed well, writes management specialist Karen Gately

Large-scale job losses unfortunately continue to feature all too frequently in our news headlines. Tough economic conditions, rapidly changing industries and competitive markets are commonly reported reasons for corporate downsizing. While staff cuts are typically made with the intention of strengthening an organisation’s future, how the process is managed will impact on the extent to which benefits are realised. Lost productivity, diminished quality of products and services, and inflated employment costs due to high staff turnover are just a few of the challenges organisations face when downsizing isn’t managed well.

While there is nothing anyone can do to avoid altogether the pain inherent in downsizing, a planned and  compassionate approach will go some way towards minimising adverse impacts on people and ensuring the organisation’s spirit and capabilities are protected for the future. For any team to move forward with strength to a better and brighter future, trust in and respect for the organisation’s leadership team is essential. The approach to leading change will have a powerful impact on trust and respect.

Lay foundations of trust Minimising the impacts of downsizing should begin long before it becomes necessary to make redundancy decisions. Making substantial changes to your workforce while maintaining engagement of the rest of your team is only possible when people trust, and feel loyalty towards, the organisation. Trust is at the core of any strong relationship, and nothing has as great an influence on the success of a team as trust does, especially when faced with difficult circumstances.

When times are tough people who trust their manager and leadership team are more likely to accept decisions made to protect the viability of the business. When trust in the character and competence of leaders is low, resistance and conflict typically escalate. Without trust a leader will struggle to inspire people to strive at the best of times, let alone when they are facing a future of uncertainty or little hope of success.

Look ahead At times it is challenging to forecast conditions and circumstances that will lead to downsizing. However, adopting a planned and considered approach to running your business will go some way towards ensuring you see challenges coming before they arrive. Forecasting what is likely puts you in the driver’s seat, enabling you to be ready for and to proactively manage change.

A structured and disciplined approach to change planning and implementation is key to ensuring people are treated with the fairness and respect they deserve. Identifying roles that are no longer required, redeployment opportunities, and ultimately the redundancies that will occur demand that full and careful consideration are given to both options and their consequences.

Think about what the future looks like before deciding to expand your team or hire new people. Maintain an optimal level of resourcing in your business by questioning the need for every role as the need to recruit for them arises. Before going to market to fill a vacancy, consider the likelihood that the business will require that position in the foreseeable future.

Do what’s needed – no more and no less. Think very carefully about the extent of the job cuts you make. Consider the immediate future and the roles and capacity the organisation will need to drive forward post-implementation of redundancies. While a harsh and deep cut to your resources may achieve short-term
financial objectives, capabilities and energy are essential to achieving the turnaround or improvement objectives of your business

Be respectful, fair and compassionate People impacted by downsizing typically want to know that every decision reached was made with fair and reasonable consideration given to all of the options and the consequences. It’s essential that you demonstrate you care and are doing everything you can to avoid unnecessary impacts on staff and their families. Help people to feel personally valued and that the loss of their job is sincerely regrettable.

At every step along the way, choose to behave in ways that have a positive impact on the spirit of your team. Behaving with respect, fairness and compassion is likely to serve you well and earn the respect of most reasonable people. Focus on each person and strive to understand their circumstances and how they will be impacted by change. Appreciate who people are and how their lives are impacted by your decisions. Never step back from the decisions you have to make, but get the insights you need to minimise any adverse impact on people.

Communicate well Being authentic and honestly sharing insight are important elements of treating people fairly. Give your team the opportunity to understand reality, while protecting commercially sensitive information. Reasonable people understand that there are some things you can’t say, and will trust you to be the judge of what you can and can’t. Every manager should be coached to communicate decisions clearly, provide facts accurately and deliver news with sensitivity.

Often when people complain about being lied to and misled, the issue is the approach taken, not the intentions of their employer. It’s common for organisations to fear providing information too early and risk undesirable staff turnover or disclosure of information. However, where there is a void of information people will typically make assumptions and draw their own conclusions. Proactively manage the awareness and perceptions of your team. Be upfront with people about how and when redundancy decisions will be made.

Maintain communication with the team well beyond the last day that employees who were made redundant left the business. After job cuts have been implemented people often spend a lot of time talking about what has happened and worrying about what might happen in the future. Keep communicating with your team about why you have confidence in the future and the role you need them to play to make it happen.

If the truth is that further redundancies are likely, help the team to understand what needs to change to avoid those circumstances. Irrespective of how hard the fight might be to avoid that reality, you are better off focusing your team on what they can do, rather than simply leaving them to wallow in the miserable reality that further job losses are looming.

Look out for everyone involved Never underestimate how stressful downsizing can be for everyone involved. Some organisations, however, underestimate the stress felt by HR staff and the leaders driving change. These people often find themselves having to work long hours, many of which are spent engaged in emotionally charged conversations, making decisions that have life-changing consequences for people they know and in many instances like.

Check in with these people and encourage them to seek the support they may need. While managers and HR need to avoid getting caught up in emotions that undermine their ability to drive the process with objectivity and professionalism, that can be easier said than done. Understand that while maintaining high standards of conduct is essential, at times people immersed in the process of downsizing will struggle to have the strength they need to maintain composure and resilience.

Karen Gately is a leadership and people management specialist and a founder of Ryan Gately, a specialist HR consultancy practice. She is also the author of The People Manager’s Toolkit: A Practical Guide to Getting the Best from People and The Corporate Dojo: Driving Extraordinary Results Through Spirited People. For more information, visit or contact [email protected].