Not Downsizing but Rightsizing for Company Profit
These days, most firms are looking for tactics to save cash, and downsizing is one clear option. The miraculous number for layoffs looks to be about 10 percent; firms feel that they can cut this number of staff as a quick way to boost profitability. But downsizing has lots of risks: folks get demotivated, they become concerned, and some will even jump ship thinking another organisation is more secure. On top of this, firms could find themselves with too little talent to bring in new revenue and provide the quality of service needed to keep existing clients.
When Kea HR consulting talks about rightsizing we're not employing a nice euphemism for job cuts; we are talking about a controlled process that may improve a setups profits. Effective rightsizing concentrates on creating success and avoids the perilous downward momentum that may come from poorly planned downsizing.
How Much Can You Safely Cut? If your company has decided to reduce staff levels, the question becomes what quantity of people you can safely cut? Far too frequently companies take an accounting driven approach: We need to save ?1 million, which means we should cut 10 percent of payroll. The difficulty is that cutting that many staff may lead to reductions in revenue that absolutely weaken the cost benefits. The solution is to look at operations before making any call on the quantity of staff to cut.
Kea HR consulting group believes the safest road to rightsizing is through work-force optimisation. When affiliations conduct a workforce optimisation analysis they glance at the annual variations in workload. Once the minimum and maximum workloads are known, they can better work out how many permanent staff is required to handle the ongoing workload and then plan to deal with the tops in workload by utilizing non permanent staff.
With this approach you know the minimum number of permanent staff needed and can be assured there'll be no impairment of your organizations ability to generate revenue since temporary staff can offer sufficient numbers to meet customer needs. The trick here is to work with a staffing agency that understands the type of work to be done and can offer trained folk with the right skills and the right cultural fit.
A few individuals think HRs role in rightsizing is just to handle terminations. A good HR consulting group will add value to the choice making process by providing an operational analysis. Its that research that will let you know where you can safely make cuts and where a staffing agency may be employed to fill in any gaps due to variations in demand.
Who Can Be Let Go? Once a company has done the operational research that tells them how much to chop, the next question is who to keep and who to let go. How do corporations make this call? Circuit Town infamously decided to chop its experienced staff since they were more expensive"a move that led straight to no end of bad publicity and a decrease in the power to serve customers on the sales floor. More traditionally, corporations let go of those most recently employed and keep long reign staff. Another popular strategy is to share the discomfort by insisting that each dep. cut two folk. Unfortunately, none of these decision rules do anything to guarantee that the company will be positioned to achieve profitability after the job cuts.
Clearly, the smart course of action is to keep your best performers. To try this you need a trustworthy methodology to identify them. Kea HR consulting group has always been encouraging firms to conduct Top Performer Profiling (TPP) so that they understand what distinguishes high performers from average ones. Top Performer Profiling involves having a look at the three areas which lead to high performance:
1) Knowledge & experience
2) Skills & capabilities
3) Behaviours & characteristics
Once a company has determined what mixture of attributes leads to success it can rate folk against that profile.
If the organization has been conducting Top Performer Profiling then they'll already know which folks they can afford to let go. However , even in the absence of having done this sort of research in a severe way, companies should bring in an HR consulting group to help them through the thinking process of identifying who to let go. Its crucial to. Remember that in rightsizing the goal isn't to just cut headcount" its to enhance profits. Unless you've got a good process for deciding who to keep and who to let go, this end result wont be accomplished.
Follow-Through: From Downsizing to Success Any form of downsizing, even a well run rightsizing process, requires that the HR consulting group uses good change management practices. Firstly there has to be a great deal of communication.
Experience has shown upper management solidly belittle how much communication is necessary. Folk need to appreciate what has happened, how it will make the company stronger, and what it suggests to them.
One of the crucial facets of communication is that the leadership has to show it is competent and is leading the company to a better future. This is one of the benefits of rightsizing in opposition to a downsizing. If staff see that management is taking a thoughtful approach to work force optimization they will feel much more assured about the leadership than if all they see is a pointed round of redundancies. The company should be explicit in what organizational changes are being made to house the fact that it will have less headcount, but the same quantity of work. Alternate choices to Downsizing At this point we hope you see how rightsizing can reduce costs in a way that leads to greater success. We also hope that you recognize the risks of downsizing and understand that if its badly done it will hurt the company.
Remember that the aim is to improve profits. You can improve profitability by reducing costs or increasing revenue. Regularly cutting headcount appears like the simplest action to take. Regretfully the income statement makes no distinction between nonessential costs and the costs which can lead to money generation. If you cut the incorrect costs you damage money and that leads to lower profitability. So before resorting to drastic downsizing firms should think about programs such as:
Income cuts and bonus program elimination/modification Reduced benefits programs Reduced facilities cost (leases, resources, for example.) Reduced travel (through leveraging Web conferencing and other technologies)
More importantly, new revenue initiatives should also be considered, such as:
Fresh product offerings New markets/applications for existing products
Price raises
Expanding into new geographical markets
A downturn is a time to be smart about reducing costs and creative about augmenting earnings. Kea HR consulting knows how to make certain that if you do cut staff, you do so in a way that makes your company stronger.
When Kea HR consulting talks about rightsizing we're not employing a nice euphemism for job cuts; we are talking about a controlled process that may improve a setups profits. Effective rightsizing concentrates on creating success and avoids the perilous downward momentum that may come from poorly planned downsizing.
How Much Can You Safely Cut? If your company has decided to reduce staff levels, the question becomes what quantity of people you can safely cut? Far too frequently companies take an accounting driven approach: We need to save ?1 million, which means we should cut 10 percent of payroll. The difficulty is that cutting that many staff may lead to reductions in revenue that absolutely weaken the cost benefits. The solution is to look at operations before making any call on the quantity of staff to cut.
Kea HR consulting group believes the safest road to rightsizing is through work-force optimisation. When affiliations conduct a workforce optimisation analysis they glance at the annual variations in workload. Once the minimum and maximum workloads are known, they can better work out how many permanent staff is required to handle the ongoing workload and then plan to deal with the tops in workload by utilizing non permanent staff.
With this approach you know the minimum number of permanent staff needed and can be assured there'll be no impairment of your organizations ability to generate revenue since temporary staff can offer sufficient numbers to meet customer needs. The trick here is to work with a staffing agency that understands the type of work to be done and can offer trained folk with the right skills and the right cultural fit.
A few individuals think HRs role in rightsizing is just to handle terminations. A good HR consulting group will add value to the choice making process by providing an operational analysis. Its that research that will let you know where you can safely make cuts and where a staffing agency may be employed to fill in any gaps due to variations in demand.
Who Can Be Let Go? Once a company has done the operational research that tells them how much to chop, the next question is who to keep and who to let go. How do corporations make this call? Circuit Town infamously decided to chop its experienced staff since they were more expensive"a move that led straight to no end of bad publicity and a decrease in the power to serve customers on the sales floor. More traditionally, corporations let go of those most recently employed and keep long reign staff. Another popular strategy is to share the discomfort by insisting that each dep. cut two folk. Unfortunately, none of these decision rules do anything to guarantee that the company will be positioned to achieve profitability after the job cuts.
Clearly, the smart course of action is to keep your best performers. To try this you need a trustworthy methodology to identify them. Kea HR consulting group has always been encouraging firms to conduct Top Performer Profiling (TPP) so that they understand what distinguishes high performers from average ones. Top Performer Profiling involves having a look at the three areas which lead to high performance:
1) Knowledge & experience
2) Skills & capabilities
3) Behaviours & characteristics
Once a company has determined what mixture of attributes leads to success it can rate folk against that profile.
If the organization has been conducting Top Performer Profiling then they'll already know which folks they can afford to let go. However , even in the absence of having done this sort of research in a severe way, companies should bring in an HR consulting group to help them through the thinking process of identifying who to let go. Its crucial to. Remember that in rightsizing the goal isn't to just cut headcount" its to enhance profits. Unless you've got a good process for deciding who to keep and who to let go, this end result wont be accomplished.
Follow-Through: From Downsizing to Success Any form of downsizing, even a well run rightsizing process, requires that the HR consulting group uses good change management practices. Firstly there has to be a great deal of communication.
Experience has shown upper management solidly belittle how much communication is necessary. Folk need to appreciate what has happened, how it will make the company stronger, and what it suggests to them.
One of the crucial facets of communication is that the leadership has to show it is competent and is leading the company to a better future. This is one of the benefits of rightsizing in opposition to a downsizing. If staff see that management is taking a thoughtful approach to work force optimization they will feel much more assured about the leadership than if all they see is a pointed round of redundancies. The company should be explicit in what organizational changes are being made to house the fact that it will have less headcount, but the same quantity of work. Alternate choices to Downsizing At this point we hope you see how rightsizing can reduce costs in a way that leads to greater success. We also hope that you recognize the risks of downsizing and understand that if its badly done it will hurt the company.
Remember that the aim is to improve profits. You can improve profitability by reducing costs or increasing revenue. Regularly cutting headcount appears like the simplest action to take. Regretfully the income statement makes no distinction between nonessential costs and the costs which can lead to money generation. If you cut the incorrect costs you damage money and that leads to lower profitability. So before resorting to drastic downsizing firms should think about programs such as:
Income cuts and bonus program elimination/modification Reduced benefits programs Reduced facilities cost (leases, resources, for example.) Reduced travel (through leveraging Web conferencing and other technologies)
More importantly, new revenue initiatives should also be considered, such as:
Fresh product offerings New markets/applications for existing products
Price raises
Expanding into new geographical markets
A downturn is a time to be smart about reducing costs and creative about augmenting earnings. Kea HR consulting knows how to make certain that if you do cut staff, you do so in a way that makes your company stronger.
About the Author:
Who Am I? Kathryn Aldred is a professional HR Advisor, based in Rotherham but working across South Yorkshire and the North of England providing off and on site HR support. Generally the enterprises I support have between 5 and 250 workers and the great majority of them don't employ a HR Pro. For more info about our services please come visit my site via this link;HR Sheffield
posted by Vittoria @ January 14, 2012
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