If You Must Downsize, Ask These Questions First

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For organizations struggling to find their way in a world reshaped forever by COVID-19, three practices can help companies more effectively manage downsizing, minimize layoffs, and enhance their talent strategy with reskilling, upskilling and redeployment.
April 12, 2021

This article was originally published by John Morgan by LHH.

There are two inescapable truths about layoffs, according to John Morgan, LHH COO & EVP in the Americas.

First, layoffs are sometimes a necessity for organizations that need to transform the way they do business, reduce costs, incorporate new technology, or optimize the use of their talent.

And second, some of the world’s most successful organizations are responding to these very same challenges while minimizing layoffs.

Why would a leading provider of outplacement services want to highlight strategies to minimize the use of layoffs in some situations? It’s a good question that I am facing more and more in my conversations with client organizations.

I tell our clients that one of the advantages of being an industry leader is that it allows us to see the emerging trends before a lot of other players. In this instance, employers are rethinking downsizing strategies to include not only a well-thought-out transition plan that provides outplacement, but also identifies alternatives that can minimize the impact to the workforce.

One thing is certain: post-pandemic, we need to reimagine a better approach to layoffs that not only provides a framework of support to employees through this crisis, but also provides a framework for organizations to build a highly skilled workforce that’s prepared for the future.

The new reality around layoffs

When organizations transform or economies deteriorate, layoffs are an inevitable result. Today, we see some of the world’s biggest companies that found themselves on the wrong side of the “essential services” equation have seen their prospects disappear overnight.

Companies in the retail, arts and culture, airline, hospitality, and tourism industries have been forced to undertake swift and severe reductions in costs that inevitably resulted in widespread layoffs.

But not every company is facing the same drastic economic pressures. Many others have seen their business models profoundly disrupted, but not decimated. These organizations need to transform what they do, how they do it, and the people they employ.

In the past, outplacement services have played an important role in helping organizations manage workforce transformations to produce the best possible outcomes for both employer and employee. However, during the 2009 financial crisis many companies clearly cut too aggressively, making recovery painfully slow.  Today, we see many organizations have learned from this experience and are adopting a strategy that balances cost cutting to survive today and investing to grow in the future, positioning themselves for success after recovery.

Most of the CEOs or CHROs I talk with already know that this is the best way forward.

The global skills shortage that existed pre-pandemic has not disappeared with the arrival of COVID-19. Shedding people now in the hopes that you can replace them with employees better suited to the future may not be a viable strategy.

Organizations may also neglect to consider the costs of layoffs that go beyond expenditures on severance and separation. In a world where harsh verdicts come swiftly from traditional and social media, a poorly communicated or poorly managed layoff can do irreparable harm to a company’s relationships with its employees and customers.

The key question all business leaders need to ask themselves

For organizations faced with a need to downsize, the question is simple: can we reduce the number of layoffs and, instead, build a workforce of the future through reskilling, upskilling and redeployment?

The best news I have for organizations facing this question is that there is a win-win scenario here.

The holistic approach to downsizings

Applying the best practices of industry leaders in outplacement, and successful companies that have a reputation for a forward-looking approach to downsizing, there are three key best practices that must be undertaken as part of workforce planning before layoffs are triggered.

    1. Assessment. Large organizations often lack detailed information about the capabilities of the people they employ. They know who they are, a basic job description and some details on performance. But they don’t have a complete picture of all the skills their people possess. This is a blind spot. It’s also an easily reparable deficit. Assessment instruments to evaluate workforce skills can quickly create a map of your organization’s current talent capabilities and where you may need new or different people.

    2. Analytics. Assessment, on its own, will provide an excellent picture of the here and now. However, to understand future skill needs, you want to do a deeper analytical dive. This involves an intensive analysis of current job descriptions and a diagnostic to determine which are most likely to be affected by advances in technology, specifically what roles will disappear, what roles will be augmented, and what new roles will be added. Identifying those jobs that can be performed by machines is essential. But it’s about more than that. This analysis can then be used to identify current employees who have the attitude and the aptitude to transition, with an investment in reskilling or upskilling, into future-fit roles within the organization.

    3. Redeployment. If you have successfully undertaken the first two stages, then you’re ready to consider a more advanced stage. While some layoffs will still be required, you can proceed with confidence knowing you’ve done everything you can to minimize the impact. Many of our clients are finding that with some upfront assessment and talent mapping, they are now positioned to efficiently reskill and redeploy employees rather than lay them off. That not only quickly and cost-effectively fills talent holes but saves on severance and separation benefits. For those layoffs that prove impossible to avoid, you’ll want to offer the individuals outplacement services to ensure their transition into a new position is smooth. That will help contain severance and separation costs, limit any damage to employer brand, and get employees back to work faster.

It's important to note that many of our clients who invest in assessment and analytics ultimately find they can significantly reduce the number of people they are letting go. Armed with relevant data, they have a complete picture of all employees and future roles they may be able to fill. This ensures that organizations are bringing out the most value out of their people, both for now and well into the future, while minimizing severance and separation costs.

Business leaders have come to understand that drastic times require drastic actions. In the past, that has meant swift and sometimes significant layoffs to address financial pressures.

However, during the unprecedented economic challenges we now face, it’s time we rethink our downsizing playbook.

That will mean reimagining our approach based on assessments, analytics, business intelligence and redeployment. This is the future of workforce planning and there is no better time to get with the program than now.