Companies within the business industry are in it for the profit. Usually companies start out small and expand as sales increase, bringing in a growing percentage of profit allowing the company to expand and scale up.
Hopefully, expansion and scaling up will become the beginning of a virtuous cycle of productivity and profitability. However, this is not a business industry rule and unfortunately sometimes things don’t go as planned, productivity goals are not met, sales are not as high as projected and rather than scaling and expand, it’s time to scale down and reduce the size of the workforce with the objective of reducing expenses that are part of the cost of a product or service.
Reducing the workforce of a company is not something that should be taken lightly and is not the simplest thing to do, both from an organizational standpoint and from a financial standpoint since severance costs usually add up to be more expensive than keeping the employees as such. In addition, considering the reduction on the compensations and even firing people before reviewing and even trying other options to increase productivity and cut costs will negatively affect the morale of the workforce. Because of these reasons, reducing the workforce shouldn’t be the first thing that pops into the mind of the managers when thinking about cost reductions.
If after careful consideration management decides that reducing the workforce is still the way to go, there are some considerations that should be kept in mind. Whoever gets to keep their job and regardless of the number of employees that remain with the company, they should be trained to become as efficient as possible to at least maintain productivity levels and, if possible, even increase them.
Throughout the whole business industry, it’s a well-known fact that it’s better to overcut once than to undercut several times in a row. Downsizing affects the spirits and the morale of the company and doing it more than once in a reduced space of time will only generate discomfort due to a lack of stability and uncertainty.
When it has been established that a workforce reduction is needed, communication becomes a key tool to keep remaining employees at ease and assured that the company knows what it’s doing and has a clear vision and direction ahead. Vision and direction are aspects the business industry should always keep in sight.
Even though it’s not something enjoyable and no manager looks forward to reducing the workforce, sometimes there’s nothing else to be done. The business industry can be harsh, but ultimately businesses come to be to make money and if that’s not happening something has to change so that it starts happening. Make sure you analyze the situation of your company in depth and consider all other available alternatives before acting on workforce reduction as the negative consequences might outweigh the positive. Take action to boost the morale of those still in the company so that an already difficult situation doesn’t cause unnecessary and extended turmoil.