The Most Important Things to Consider When Downsizing Your Business
Downsizing a business is never an easy task, however, with many businesses not performing up to standard as a result of the pandemic it has become necessary. Richard Wayman, CIA Landlord’s Finance Director reveals the most important factors to consider when downsizing during the pandemic.
Why should you downsize?
Downsizing is the process of minimising costs by reducing headcount and number of employees. These are usually permanent layoffs but during the pandemic, we have seen a rise in furloughs or temporary layoffs in order to survive the lockdown period. This also means that a lot of changes may be necessary for the employees kept on staff.
Fewer employees means many workers have to take on additional responsibilities in the company to compensate for the reduced staff. The closure of certain branches of businesses may also mean the work day is changed for staff as well as changes to certain rolls and how the business functions during the pandemic.
Who should you let go?
Before you make any job cuts, it’s crucial to consider who should be kept on and who will have to be let go. If you have any important projects or essential elements to keeping the business moving, you will need to retain the right employees to do the job. If people you let go hold important roles, these will have to be filled whether that’s by other staff or outsourced, so be sure to run this by management teams that it is possible before you make any decisions as it may be more difficult to refill these roles in the long run or train up employees.
It’s also important to consider who will work well as part of these smaller teams and be ready to deal with challenges such as burnout and protecting your staffs mental and physical health during this time.
Consider temporary layoffs
Although we are experiencing a turbulent period, you shouldn’t just let go of staff to save money from their salaries, so first broach the topic of temporary layoffs. However, once you have made any form of lay off from the staff, be prepared that you may lose that employee in the long run, as no one will want to feel uncertain about their position, especially during this time. Before making a permanent or temporary cut on staff, review everyone’s progress and performance in the company with HR so that you can make an informed decision.
You should also have a sufficient reason for why you lay off an employee as well as provide as much notice as possible to the employees you are laying off, to be considerate and empathetic to the situation as well as avoid any legal repercussions.
Should you outsource the jobs?
Before laying off employees or shutting down departments or roles, make sure you are aware of how you will outsource the essential positions. Investigate where you can get the most cost-effective work for the job without detracting from the performance or value.
Outsourcing is typically a great way to save on budget and overall costs; however, this will deviate significantly from business to business so be sure you know what is available. You should also consider temporary contractors or freelancers, as many of them may be out of work currently and offer a better deal for the same job.
Set clear objectives
Before you have made any decision and downsized your staff, create a clear strategy of how the business will continue. It’s important that you don’t view this reduction as moving backwards but just a temporary setback. Set clear objectives of where you want to the company to be in six months, one year, five years and even ten years down the line and how you envision reaching these milestones and making a profit. It is also crucial to create a reactive strategy to combat any uncertainty or sudden changes in the market.
This may mean updating how you market your business or products as well as revaluating what services you can or could provide amid the pandemic.
Always consider the long terms progression and survival of your business and don’t let go of a team or departments you may need in the future to save money in the short term unless it’s vital to the welfare of the business.