Corporate downsizing isn’t exactly a favorite topic amongst business owners and HR managers but it’s sometimes an inevitable reality. As business needs change, costs go up, and wages increase; more and more businesses are feeling the squeeze.
Whether you’re downsizing due to financial issues or a lack of need for certain departments, you need a plan. Having the right corporate downsizing strategy will minimize your chances of ending up in a legal battle and you’ll save a lot of money along the way.
What is Downsizing?
Corporate downsizing occurs when a company needs to restructure or reorganize the business for various reasons. Sometimes a downsize occurs when the company isn’t making enough money and other times it can occur when certain systems become automated and the employees are no longer needed.
Regardless of the reason, company downsizing can have a significant impact on employees but it can also affect business owners and HR managers as well.
With downsizing often comes the need to move or relocate the business to a small office or facility. To keep everything on track it’s important that the business isn’t carrying more overhead than necessary.
How Does Downsizing Work?
Once the company executives have decided that a downsize is inevitable, the managers and ownership will typically alert the employees that are being laid off. These are most often permanent layoffs but in some cases, they may temporarily lay off the employees while the company restructures.
With these layoffs will also come changes in day-to-day operations for existing employees. The employees that remain may have to learn a new area of the business or take on additional work for the employees that are no longer there.
This reason alone is why it’s important to have proper downsizing and layoff strategies. Trying to go through this on a whim is never a good idea.
Developing a Corporate Downsizing Strategy
When it comes to putting together a downsizing strategy, there are a few factors to think about outside of simply laying people off:
Early Retirement
Many companies will offer severance packages to employees who have been with the company for a long time. Regardless of how many years they’ve put in, as employees age, their ability to work diminishes and sometimes replacing them with younger and more motivated employees is an inevitable choice.
Furloughs
Furloughs occur when a company is experiencing financial distress and the employees are put on unpaid leave until the slow period passes.
Voluntary Layoffs
In some situations, it’s beneficial for the company to figure out if there are any employees who would actually like to be laid off. You can incentivize them with severance pay and outplacement services.
How To Decide Who To Lay Off?
Since downsizing is most likely the result of financial hardship, it’s important that you choose the right strategy, because the downsize could actually lead to further issues if you don’t retain the right employees. Here are some ways to choose which employees should be laid off during a corporate downsizing.
Performance
The first and most obvious reason to keep any employee is because they perform well. The problem is, a high performing employee may work in a department that isn’t required any more. In this case, you could always try and transfer them but that can lead to further concern over subjectivity and favoritism.
Seniority
Protecting yourself from discrimination lawsuits is important so you can simply go through and layoff all of your oldest employees. Generally, the employees who should get laid off are the newest ones.
Status
Generally speaking, full-time employees should remain over temps and part-timers. If someone is full-time it likely means that they’re in a more serious position and more reliable.
Relocating Your Business After Downsizing
As previously mentioned, during a company downsizing there may be a need for an office or employee relocation. If your business went from 75 to 50 employees, that could be a good enough reason for you to get a smaller facility. Perhaps you have areas of your current building that are no longer in use and paying the lease is only making things more difficult.
That’s where a company like ARC Relocation comes into play. We specialize in corporate relocation and we’ve been doing it for decades.
We’ll help you through the process from planning and strategizing to packing and moving. We’ll help you find the right moving company and we’ll even coordinate housing and transportation for employees that may be moving a long distance.
If you’re thinking that a relocation is inevitable with your corporate downsizing, it’s time to think about ARC Relocation. Click here to schedule a no strings attached consultation today.