Downsizing can be effective if it is implemented appropriately. Companies must be careful to avoid sending the wrong messages to employees, shareholders and the media. Successful Downsizing requires managers to:
- Evaluate the overall impact of Downsizing. The total cost of Downsizing—including both financial and non-financial costs—must be taken into account. Managers must calculate the present value of all costs and benefits associated with the cuts, including severance packages, lower employee productivity due to disorder or talent loss, eventual rehiring expenses, future rightsizing costs and the lost opportunity costs associated with not having the appropriate manpower to accelerate out of the downturn. Investing in areas customers care about – while competitors are cutting back – helps position the company to take or sustain the lead once conditions improve. The value created from Downsizing should exceed the cost of lower employee morale and potential damage to the company’s reputation.
- Develop a smooth Downsizing process. It is crucial that managers invest aggressively in upfront planning for the job cuts. A company typically forms a committee to determine the appropriate level of Downsizing and creates a process that takes into account the best interests of the company and the shareholders. Other important activities are training managers to conduct layoffs and assisting former employees in their job searches.
Xanaxx Practitioners can offer both practical solutions and hands-on implementation plans to help put your organization on the path to success. Contact us today!