Ten Tips For Downsizing with Grace in Difficult Economic Times

By: Gireesh Sharma
Date: November 26th, 2008
Posted in: HR Best Practices, HR Technology, Performance Management | 17 Comments »

Difficult economic times call for tough calls, and, downsizing is one of the toughest calls that leadership and HR have to take. Though downsizing is the most hated task and nobody wants to do it; it is a necessary evil for saving a company from an economic collapse.

With little efforts organizations can minimize the effect of downsizing on economy and employees to a some extent. Here are 10 tips that one can consider while downsizing:

1. Do a manpower analysis before you Downsize!

Think twice, do you really need to vacate those seats and happy faces. Do not make subjective decisions!

Work and re-work on your manpower requirements – for today and for tomorrow. A good manpower planning software can assist you and your mangers to accurately assess your manpower requirements.

2. Consider cost of Rehiring when economy regains

The economic crisis is not going to last for ever. When economy starts improving you will have to re-hire people. Re-hiring has a very high cost associated with it. You will not only need to re-hire people, you will also have to train them to be productive enough. Are savings from firing today adding to tomorrow’s hiring costs ?

3. Is downsizing the Only option?

Most companies opt for downsizing because to save money. Before you make a downsizing decision, think of all other possible options to save cost like going paperless, automating a specific task, increasing working hours to be more productive etc. If nothing works and downsizing is a question of life or death for organization – then do it.

4. Do not Hurt Your Employer Brand

Make separation process as good and dignified as possible Allowing Legal Concerns to Design the Layoff. Do not damage your employer brand. You will soon be re-hiring and then your employer brand will be the biggest asset.

5. Managing Legal Concerns

Consult your legal department (or your company’s lawyer) before downsizing. Period.

6. Don’t Create Panic in Employees, Investors, Market and Country

The economic crisis is forcing you to separate some employee and there is no way around. No problem! Do it but avoid creating a panic around, in employees, in investors, in market and in country by crying loud about the downsizing. If you are downsizing, do it as quietly as you can. Let your employees separate graciously and let no-body else know that they were the part of downsizing statistics.

7. Ensure that only low-performers go

Double check your downsizing list to ensure that only low-performers are earmarked for separation. Gather data and reports from your performance appraisal software, if you have one. If you do not have one, try to get one. Doing a effective performance appraisal before you earmark employees for separation can help you retain your top talent, while letting low performers go. Click here to view features of a performance appraisal system.

8. Create an Employee Separation Department

One outsourcing company (that I know) during its hard times (when it lost a major client) had to downsize significant workforce. To manage downsizing, HR created an Employee Separation Department. This department helped employees to look for new job elsewhere, trained them on interview skills, forwarded their resumes to HR consultants and help them complete the exit process painlessly. The result: many employees to got another job within 2 months of their separation and no hard feelings for the organization.

Capture the exit interview details in your off boarding system. Many employees reveal truths and facts during exit interview.

9. Sufficient Notice Period to Employees

Give sufficient time to earmarked employees so they can start their search for new employment and try to get a new job and plans to handle difficult times.

10. Counsel Employees on survival during tough times

Hire or designate an expert who can counsel employees on various issues related to downsizing. Let then know the good reasons for downsizing, keep their morales up and ensure that their spirits are high. Also advise then on how to manage their finance while they are unemployed.