Strategies for Rightsizing Companies

Rightsizing is the act of paring down a workforce and reorganizing management to find the optimum staffing level for increased cost-efficiency and productivity. Distinct from the concept of downsizing, rightsizing does not necessarily require massive layoffs or other drastic actions. As a strategic tool rather than an emergency measure, rightsizing can include restructured job roles, workforce attrition or even voluntary early retirement. Understanding rightsizing implementation strategies can help you to optimize your workforce with as little negative impact as possible.

Workforce Attrition

  1. Allowing your workforce to shrink by attrition can be one of the least painful rightsizing strategies, albeit one that requires a longer time span than others. Instituting a hiring freeze can effectively cap the number of employees on the payroll, allowing the workforce to shrink by not replacing people as they leave. In a hiring freeze, you may need to shift employees around and alter job descriptions to absorb the duties of departing co-workers. This can introduce ever greater operational efficiency over time, but there will come a point when remaining employees are stretched to their maximum productive capacity, which can be a sign that the workforce has reached its optimum size.

Early Retirement

  1. Offering early retirement packages allows long-term employees to leave voluntarily, without losing the retirement benefits they have worked towards throughout their time at the company. Early retirement options can allow you to trim some of the highest salaries off the payroll if your pay raises are based on seniority, while still avoiding the unpleasantness of an involuntary layoff.

Optimize Performance

  1. If large-scale layoffs are absolutely necessary, consider making layoff decisions based on performance rather than seniority. Retaining your top performers, regardless of seniority, can reinforce the main goal of rightsizing -- increased operational efficiency and productivity. Basing decisions on seniority, regardless of performance, can introduce a drag on productivity when the dust clears. To honor your long-term employees' loyalty, give those with seniority and low performance an opportunity to increase their performance before letting them go.

Creative Options

  1. Rightsizing almost always involves letting people go, but there are ways to minimize the number of people you have to part with. Consider freezing pay raises, cutting benefits, eliminating overtime hours or reclassifying some employees as part-timers to find ways to keep people on board while still reducing payroll costs. Alternatively, consider furloughing some employees temporarily or allowing certain employees to work from home to reduce overhead.

Smoothing the Transition

  1. When layoffs are necessary, the ways in which you interact with laid-off employees can greatly impact your reputation as an employer in the job market. Give laid-off employees as much advance notice as possible, allowing them plenty of time to search for new opportunities. Provide voluntary layoff deals whenever possible rather than forcing people out. Provide as much compensation as reasonably possible to your laid-off staff for several months to help ease their transition, and keep their insurance benefits active for the same period of time. Offer job-hunting and resume assistance to those who need it and provide each laid-off employee with letters of recommendation and work references.