Selective 'right-sizing': A tool for tough times

For many organisations the current economic downturn means only one thing - cost reductions. However, in the past 12 months most of the easy cut-backs have been made and now those struggling organisations are being forced to consider staff lay-offs. But how do you decide how many and which staff to cut?

The decision to lay-off staff is never taken lightly. The instruction to 'lose 10% of staff' is both a difficult one to hear and to execute. For the sake of organisational morale such decisions should be well-considered and carried out quickly. Unfortunately, even in large companies, lay-offs are often executed using basic or even primitive means - otherwise known as the phone list and shiny pin approach.

All too often organisations reduce a layer of middle management, assuming that the lower rungs of employees can take on the operational aspects of the organisation while upper management will pick up any additional strategy and ongoing management. This often has dire results. Upper management are not exposed to the nitty gritty of current projects, and the lower rungs have no power to make decisions. Projects stall, reporting stops and revenue is affected.

Getting it right
More mature organisations should be able to rely on a wealth of human capital data to assist with making the right decisions. Talent management information overlaid with performance management data is the most robust and detailed method of selecting the correct candidates for downsizing.

Measuring an individual's past performance ratings alongside current performance and other potential factors will support more informed decision making. It also provides information that will help to evaluate the likely impact of letting certain sectors of the workforce go.

It is important to consider all the elements about an employee that may be relevant to your organisation's position before deciding who to terminate and who to keep. Examine each candidate's historic and current performance management review ratings and flight risk data or career aspirations. Ask yourself three key questions:

1. Is the person nominated as a successor to any critical roles?
2. What is their potential rating within the organisation?
3. What is their performance rating against organisational competencies?

Good human capital management tools should be able to give you this data quickly and easily. They can also help to filter staff by division, location, salary bands or any other desired metric.

Measuring employee performance versus potential is important because performance alone doesn't tell the whole story.  An employee who is under-performing may still show latent potential. The problem could be something as simple as the fact that they are in the wrong role or that they aren't currently challenged. 
 
Such data is typically drawn from a variety of employee and management reports and provides a good guide to changes in an employee's attitude and performance over time. It will also assist decision makers to identify the low performance and low potential employee population quickly and easily.

Organisational impacts

Experience shows that when the middle management layer is slashed en masse, ex-employees return as contractors to 'plug the holes' in the ensuing months. Not only is this financially obtuse, the returning incumbent will no doubt be embittered, smug and will probably under perform. This then impacts the entire team or business unit and demonstrates to all that management made the wrong call in the first place.

There is no doubt that some businesses are doing it tough. The leading international economies are still deeply troubled and this fact will continue to negatively impact the operations and outlook for Australian organisations for some time to come.

If laying-off staff becomes necessary at your organisation, think carefully about who you are willing to lose. Use talent management tools and technologies to help weigh up and make the right decisions.  Human capital is an investment that is built up over time; you don't want to blow that investment with ill-considered responses. And once the good times are back, those same talent management tools will provide the foundations for future growth, delivering valuable insights into your organisation, showing you where its strengths, weaknesses and opportunities lie.

About the author

Andrew Roberts is the human capital solutions manager, ComOps. For more information visit http://www.comops.com.au

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