What Is Rightsizing?
Rightsizing is the process of restructuring a company to make a profit more efficiently and meet updated business objectives. Downsizing is a different concept, where employee numbers are reduced to maintain profitability. Rightsizing involves redefining job descriptions and reorganizing employee structures and doesn’t always entail reducing numbers. Two analytical methods can be used to determine if rightsizing is required: ratio analysis and activity analysis. The four steps in rightsizing are conducting structural diagnostics, identifying essential roles and personnel, determining operational requirements, and making changes and adapting as needed. The benefits of rightsizing include increased efficiency and achieving business objectives.
Are There Risks to Rightsizing?
Risks include loss of employee trust, loss of institutional knowledge, and impacts on organization-wide strategy.
If you cannot justify laying off employees due to financial difficulties, it may be difficult to gain the trust of current employees. This could lead to a loss of confidence among the remaining staff, and they may begin searching for more secure jobs, taking their valuable skills and experience with them.
It is important to keep in mind that departing employees will take their knowledge of the company’s operations with them, so any new employees brought in during the rightsizing process will require training and guidance to understand their roles.
In addition, your rightsizing plan should consider the organization’s overall structure to ensure that both current and future employees have the necessary support and training, even after redundancies have been eliminated. It’s crucial to examine how changes in each department will impact the organization’s broader strategy. An effective rightsizing strategy will increase efficiency across all levels of the company, rather than just reducing employee costs or workload in one department at the expense of another.