Rightsizing, in terms of human resource management, is a process that requires restructuring an organization to fulfill the present socio-economic needs and meet the market conditions and responsibilities of the company. This can be done by redefining job responsibilities, reforming the management, and cutting costs in various ways to generate more profit under the current conditions.
While it may require letting go of some employees due to changes in job descriptions, it doesn’t necessarily have to be this scenario. New people matching the job responsibilities are hired to compensate for the lost positions, so there’s no net loss of employees. In some cases, the workforce may also expand in an attempt to increase operations, thus increasing revenue generation.
What are the Differences Between Rightsizing and Downsizing?
While the initial definition may make you think rightsizing is the same as downsizing, they are actually quite different. Where downsizing means cutting down the size of a workforce, rightsizing means adjusting the workforce by redefining job responsibilities based on market demands.
While downsizing is a one-time occurrence for any organization, rightsizing takes place regularly. This ensures that the organization stays up-to-date and competitive in its industry.
While the two terms may have similar meanings, they have different functionalities and intents. That’s why, when the reformation of a company needs laying off many employees to allow the right ones in for the job, the management uses the term ‘rightsizing.’
In What Ways Can You Carry it Out?
You can use four methods to rightsize your workforce to match the current demands and required skill sets. Whether you want to carry out activity analysis, ratio analysis, driver analysis, or mathematical modeling will depend on the goal you want to achieve through this action.
1. Ratio Analysis
One of the widely used methods for rightsizing the workforce is ratio analysis, which is used to plan to restructure based on how well they utilize their resources. They carry out ratio analysis based on the relationships between certain variables, some of which are productivity ratio, yield ratio, cost per hire ratio, turnover ratio, etc.
2. Driver Analysis
Driver analysis analyzes what factors primarily motivate a business's operations by essentially investigating people's drives to carry on with their work. Any change in work structure will thus affect the drive of the individuals, resulting in a shift in their motivation and activities.
3. Activity Analysis
Activity analysis studies how efficient and effective an employee is at their job. It compares the activities the employees are doing with the activities explained in their job description.
To carry out activity analysis on employees, an organization can use a few measurement parameters, such as speed, duration of work, productivity, and how much workload they can handle. Ultimately, it will bring out the time employees spend on their job and the results they bring in.
4. Mathematical Modeling
Mathematical modeling is a difficult approach as it requires building a model to figure out how many employees are required to optimize business operations. Although challenging and time-consuming, it can provide accurate results if done by an expert. However, because of the nature of mathematical modeling, many organizations don’t employ it.
What are the Steps Involved?
Organizations planning to rightsize their workforce should take a few steps to reach their goal. To rightsize properly, the following steps are required:
Conducting a structural analysis to understand the current conditions before figuring out the changes the organization needs.
Identifying individual employees' expertise and requirements in relation to their job descriptions to understand who will be impacted by the process.
Defining what employees need to do in their roles to fulfill the operational requirements of the business. After that, the management can decide whether the current employees can carry out the operations efficiently or not.
Communicating with everyone regarding the process as soon as possible and explaining why it needs to be done.
Allowing everyone to put forward their queries and concerns and to provide feedback to make the process more efficient.
How Does it Benefit the Workforce?
The entire restructuring process can benefit the workforce and the organization in various ways. The restructuring process will allow the organization to:
Become more time and cost-efficient;
Increase the productivity of the company;
Attract top talents;
Stay up-to-date with the industry and the competition;
Rejuvenate the workforce.
Employees can also benefit from the restructuring of the organization in the following ways:
They can become aware of their roles and activities;
Top-performing employees can get recognition;
The process will allow employees to commit more to their work;
It’ll allow job rotation, thus enforcing creativity and an energetic environment with new ideas.
What Challenges will the Workforce Face?
No matter the benefits the restructuring offers, it poses certain challenges to the organization, from affecting its image to posing legal threats. It may even cause the organization to lose some valuable clients. The following are the cons of the process:
Voluntary resignation of employees;
Negatively affected performance and reduced work morale of the retained employees;
High turnover rate;
Effect on the brand image of the organization;
Security breach by laid-off employees;
Legal suits by employees on the basis of wrongful termination;
Difficulty in attracting new talents due to the high number of terminations;
Costly hiring, training, and retiring processes;
Loss of valuable clients and affected client relations due to the restructuring process.