Ways to limit risk when downsizing

Minimise the risks when making redundancies

Your organisation may have little choice at the moment but to reduce its workforce. No matter how much you care about your team and want to look after them, if times are tight, you must reduce your business costs or the whole organisation will go under and put your entire staff out of a job. However making redundancies brings a number of risks that should be identified and managed to minimise the potential for long-term damage.

Risks when making redundancies

If a restructure is poorly managed, you not only risk causing unnecessary distress to transitioning employees.

Your organisation could be exposed to expensive legal actions and potential damage its corporate reputation.

In addition, a badly planned and executed redundancy process may damage your remaining workforce’s morale. This may encourage your top talent to jump ship. Ultimately, this could damage your organisation’s brand as an employer of choice and limit its capacity to respond to an economic upturn.

Here are five suggestions for what to do to minimise risk if you’re forced to downsize. When incorporated into a strategic redundancy process, these actions can ensure you are successful in managing the remaining workforce’s morale while letting some of their colleagues go.

1. Identify roles that are key to your organisation’s success

When making redundancies, you must consider legal liability and fairness. It is essential that you evaluate what each role contributes rather than the individual in each role.

When downsizing, it is better to cut a less critical business unit rather than a set proportion of staff across the board. Reduce numbers in non-core sectors but allow for internal movement for top performers.

2. Identify what competencies you need to achieve goals

When deciding which positions are to be made redundant, you should make decisions based on objective criteria regarding the organisation’s current and future needs. This includes maintaining the right competencies after the restructure to achieve your business goals.

Ensure that you retain and engage high performers within core functions. It will be worthwhile to think about who adds value and who is hard to replace.

3. Protect your bottom line and brand

The message an organisation communicates when making redundancies affects the brand and the impacts may stick for a long time. Therefore, remember to treat former employees with fairness and respect. This will help you retain your reputation as a caring employer and make it easier to recruit new employees when conditions improve.

4. Communicate regularly

You should tell employees what you know when you know it. Providing them with accurate information and the dignity they deserve can help them to come to terms with the situation more easily.

5. Remember the remaining workforce

Remaining staff members can feel guilty they have been retained, thinking this may be at the expense of their former colleagues. Or fear they are next to go.

‘Survivor syndrome’ describes the stress employees feel after an organisational restructure that involves job cuts. The feelings they have are more normally experienced by those surviving major disasters or traumas. This can have long-term risks for staff morale, motivation, productivity and stress levels.

How can you help staff to move forward after redundancies? It is important to work hard to rebuild their confidence. It can be helpful to advise them that they are vital to the organisation’s future. Knowing why they survived will help them stay engaged.

Managing the redundancy process

The Redundancy Checklist – a guide for HR managers and employers is a good practice guide for making redundancies. It recommends a series of steps to ensure the process is carefully and efficiently managed. Some of the key things to address are legal and industrial requirements such as whether you need to consult with unions, retrenchment entitlements and final payments.