Why Your Company Doesn’t Have to Fear Downsizing

Published On: March 7, 20233.2 min read

Downsizing isn’t an easy decision to make for any business. In light of a potential recession in 2023, companies will have to consider scaling back on personnel and operations in order to cope with increasing interest rates and borrowing costs. Downsizing is, unfortunately, part of that process.

But however difficult and disruptive this process may be, it doesn’t spell the end for your company. In fact, when done right, corporate downsizing can be a springboard for growth as it allows you to steer your company in a clearer, better direction. Below, we take a look at a few of downsizing’s key advantages.

Reducing costs

One of the most obvious benefits of corporate downsizing is cost reduction. As previously discussed in an article on driving profitability during a recession, this serves as an opportunity for you to step back and reevaluate your various business costs. You may find that there are areas that you can trim down, such as human resources-related roles in payroll tracking, and workplace training and education.

By reducing in-house staff and outsourcing these services instead, you can cut labor costs and positively impact your bottom line. The cost savings from outsourcing are not just applicable to salaries. Aside from paying fewer employees, you can avoid additional expenses on workspace, equipment, and hiring and onboarding processes. Research by Forrester shows that firms who outsource spend 28% less on operational expenses than those who don’t.

Taking advantage of outplacement services

Even when you’ve figured out which positions are redundant and no longer aligned with the company’s goals, this doesn’t make layoffs any easier. But with the right outplacement strategy, you can help outgoing employees with their transition to re-employment.

For employees at all levels of the organization, a human-centered approach to outplacement allows them to benefit from personalized career roadmaps, optimized resumes, and coaching services. This can reduce their time to placement by up to 65% and expand their prospects for similar or better jobs accompanied by similar or better pay.

The availability of outplacement services also means downsizing doesn’t have to reflect badly on your reputation. Aside from mitigating the risk of unlawful termination lawsuits from former employees, it sends a clear message to remaining talent and external clients that you value your employees’ growth and well-being.

Encouraging internal talent mobility

With less repetition due to downsizing, there’s more potential for restructuring your organization and thus creating new roles and responsibilities. This opens the door for your remaining staff to advance in their careers — whether vertically by getting promoted and moving up the career ladder or laterally by taking advantage of new projects and assignments.

Besides avoiding the considerable costs and risks associated with external talent acquisition, internal talent mobility can also influence employee engagement and retention. At a time when your remaining employees are potentially stressed and anxious about the layoffs, the promise of career advancement can make them feel more secure about staying in your organization.

Adapting to industry-wide changes

When a company is more streamlined in terms of workforce and operations, it has an increased capacity to adapt to industry-wide changes, one of which is digital transformation. Investing in technology can help automate repetitive tasks performed by human workers prior to downsizing.

This is widely observed in the area of automated customer service, where digital tools such as artificial intelligence-powered chatbots answer queries and handle customer concerns with little to no human intervention. However, companies must ensure that automation does not completely dehumanize interactions with customers. This can be done by looking into providing self-service support tickets and in-app tutorials.

As exemplified by benefits in financial health, employee management, and operational efficiency, downsizing can be the right choice when approached with careful and strategic planning. To help companies continuously improve after downsizing, Align provides an easy-to-use tool for growth planning, goal setting, and performance management.

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