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What to consider when rightsizing your business

August 20, 2020

What to consider when rightsizing your business

The Covid 19 pandemic and the economic contraction which has followed, has resulted in organisations both large and nearly every small business, examining how they operate and considering how to right size the workforce to ensure it has the right balance of talent to prosper.

There are many factors to consider when embarking on a business rightsizing project. Done correctly, rightsizing can ensure your organisation is in the ideal position to face upcoming challenges, remain productivity levels and take advantage of new opportunities.

But if the process is rushed or lacking a clear strategy and plan of action, not only can your business find itself deficient in key skills, it may also mean having to address Employment Tribunal claims.

What is rightsizing?

Rightsizing is not simply corporate jargon for downsizing your employee base. Whilst downsizing does involve reducing the number of employees to increase profitability (in some cases such a layoff can ensure its very survival) rightsizing is an exercise to ensure a company has the right level of staff, a workforce with the skills and expertise required to help the organisation achieve its goals. This rings true whether you are a large or small business.

Rightsizing can involve a staff reduction or offering terms for early retirement but can also include increasing staff levels by hiring new talent, adding experienced management or creating a specialist department. The recent furlough of staff during the Covid 19 pandemic has been a catalyst for the management of many businesses to examine their headcount, to determine whether a permanent reduction and mass layoff is necessary.

Another difference between rightsizing and downsizing is the latter is an activity that occurs at a particular point in time, centring around a layoff of staff as a cost savings exercise. Rightsizing, on the other hand, is a perpetual restructuring activity, ensuring the business is always well positioned to perform and has the right resource for the organisation to reach its targets.

Effective rightsizing

The following factors should be considered:

1. Does your short, medium, and long-term business strategy need revising? Effective rightsizing cannot be achieved unless effective strategies are in place. For many SMEs, the day-to-day running of the business during the unprecedented Covid 19 pandemic and resulting lockdown, meant they had little capacity to assess whether their existing plans are appropriate for the challenges and opportunities during an economic downturn. Spend time re-evaluating goals and seeing where new opportunities lie and position your rightsizing project to resource successfully around this strategy.

2. Do you need to rightsize? Once you have your goals in place, consider whether the business currently has the skills required to meet them. Conducting an organisational audit and gap analysis of skills will help you align human resource with business goals.

3. Are all current roles required and are new positions needed? Part of the human resource audit should involve examining each staff role in each department, determining whether or not it is critical to reaching overall strategic goals and whether cost savings or investment is warranted. Consider whether new positions ought to be created and the scope of those roles. For short term projects, it may be best to employ a contractor rather than a full-time employee. If you want to break into a new overseas market, agents and / or distributors who know the region and supply chain may be the best option.

4. Is each employee in the company a good fit in their current role? Through performance reviews, you can establish whether a current staff member has the skills and expertise required to ensure operational targets and strategic objectives are met. You may also find that some members of the workforce are not well suited to their current roles. This does not automatically mean making cost savings such as redundancies, you may find that moving an employee to new position in the company solves a problem rather than reduce headcount. You may determine that some of the workforce may also be working below their skill levels and will, relish more responsibility.

Managing redundancies

Your organisation’s rightsizing exercise may result in restructuring or a reduction in your workforce – essentially downsizing If this is the case, as a business owner your company must follow the correct procedure, engage staff through the human resource team, acting professionally and with understanding to each impacted worker.

A rightsizing project may result in tension and anxiety within the organisation. Business leaders and senior management should have a keen focus on keeping employee morale high and maintaining productivity during periods of change.

To maintain trust and protect employee wellbeing, open and honest communication throughout the process is vital. Throughout the any restructuring process, expert advice from a business lawyer can help ensure your approach is professional, capitalises on opportunities and minimises risk for your organisation.

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