The coronavirus disease 2019 (Covid-19) pandemic has had a disruptive effect on our lives and the economy. It is all over the headlines: missed sales targets, lost earnings, foreclosures and job losses. At times like these, organizations often consider downsizing or reducing the number of employees. However, downsizing as a management directive must be implemented as a last resort. Rather than take such drastic and irreversible measures, companies may want to reconsider other options and opportunities such as strategic organizational rightsizing.
Unlike downsizing, which is often associated with companies facing financial difficulties, rightsizing could be done even during an economic boom. Changing market conditions, fluctuating customer needs and new internal goals may cause some companies to rethink and optimize their workforce. Businesses may be required to let go of some employees, hire new talent and shift people around to meet the organization’s goals or targets. When done strategically, this is rightsizing.
There is a difference between rightsizing and downsizing. Contrary to popular belief, organizational rightsizing is neither a friendlier synonym nor a euphemism. While both ideas are related and have some similarities, they are different in their overall goals.
Downsizing is often a reactive response and the result of poor financial performance or mismanagement. It involves reducing the number of employees a company has in order to increase profitability and reduce redundancies.
On the other hand, rightsizing is a creative, proactive and constant process of managing an organization, making it more efficient, productive, competitive and profitable. It is much more than lowering the employee headcount. It is about revamping the organization to the appropriate, optimal or “right size” for its new business objectives. In fairy tales and business, this referred to as the Goldilocks principle—the porridge is not too hot or too cold, but “just right.”
What makes rightsizing strikingly different is that it does not wait for challenging circumstances to occur. It is proactive rather than reactive; it is a process rather than a one-time event; and most importantly, it is about achieving growth rather than scaling down.
While the method includes a relatively small number of staff layoffs, an organization that is rightsizing may then hire new employees with the skills and expertise it is missing.
Management may also shift individual employees to new roles to better use their in-house knowledge in other areas. Rightsizing may add a new layer of control to increase guidance or may reduce the hierarchy to improve communication. Sometimes, rightsizing may result in larger departments. It could also be streamlined or create project-based teams.
Rightsizing is a continuous activity that may take months or years. While this workforce strategy entails much change, it can lead to improved operations, including clear and measurable business goals, cross-functional alignment on these goals, and effective management of priorities. Rightsizing also leads to increased trust between functions, an understanding of roles across functions, a focus on customer needs and streamlined decision-making.
Determining the need to rightsize
To establish if rightsizing is the right move for your business, it is essential to review your overarching goals. Is your business meeting this year’s targets? Have both internal and external factors caused your objectives to change? Do your teams have the right skills?
Answering these questions can help your company determine if rightsizing is the right choice.
However, what does the rightsizing process entail? Many companies conduct an organizational audit to see if they have the best roles and people within their business.
They will also have to eliminate redundancies, so the business runs efficiently. Aligning the workforce with the company’s strategic direction is critical. Rightsizing also involves looking at emerging trends in the industry. If it seems that the market has taken a turn due to Covid-19 and community quarantines, then businesses need to be prepared to manage the shift in direction.
Rightsizing best practices
The rightsizing process takes the company from strategy to execution, but it does not have to be long or drawn out. Here are the necessary steps.
First, the company’s people or a consultant assesses the organization, including customer and employee feedback, as well as industry best practices.
After the consultant delivers a clear picture of the company’s health across multiple areas, the next step is to get alignment on the strategic goals and measurements that will drive better results and more efficiency.
Employee teams then look at the actual work that needs to be done to deliver customer needs. This definition of work will drive how each role is designed and how roles mesh in an organizational structure.
Once a structure is established, change management and communication are needed to shift people from their current ways of working. Sometimes, this requires a leadership competency assessment or new reward program structures. The organization must make clear what will not change during the shift or transformation in order to help “survivors” better understand and commit to the new paradigm. Finally, collect feedback regularly to assess how the change management process is going.
As strange as it sounds, rightsizing the organization and retaining employees are closely linked. Organizations must communicate openly and honestly with their people throughout the process to ease tensions and to build trust with teams.
One of the benefits of rightsizing are engaged teams that have the structure and resources to maximize their potential. Rightsizing also enables businesses to plan and meet their strategic objectives more effectively.
Strategic rightsizing is a useful tool in boom times but is necessary in challenging times.
Where and how businesses optimize sends symbolic messages that will live for a very long time. Remember: customers and employees do not forget. Taking a more planned approach that stays true to the company’s intent and minimizing any impact on quality and customers could well be the differentiator that better prepares your organization for the next normal.
Mailene Sigue-Bisnar is a partner and head of the Markets Group of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory and outsourcing firms in the Philippines, with 23 partners and more than 900 staff members. We’d like to hear from you. Tweet us: @GrantThorntonPH, “like” us on Facebook: P&A Grant Thornton, and email your comments to firstname.lastname@example.org or email@example.com. For more information, visit www.grantthornton.com.ph.
As published in The Manila Times, dated 03 June 2020