A period of instability creates many challenges for organisations and it takes a lot of resources just to maintain the same pace of operations, let alone continue to grow. Many supply chains break down and companies have to rebuild all their external relationships.
Yes, adapting to rapidly changing market conditions is a complex and risky process. How do you save expensive resources and stay afloat at the same time?
Terminology, of course
Downsizing is the process of reducing and optimising the size of an organisation, primarily by reducing headcount and redistributing responsibilities. The main objective is to reduce the cost portion of the budget that is allocated to payroll. Downsizing may involve closing certain branches or lines of business, eliminating certain positions, etc.
The term ‘downsizing’ can be used in marketing, in which case it would mean reducing the volume of goods at the same price (a common joking synonym for ‘shrinkflation’).
Downsizing should not be confused with downshifting culture (giving up consumer culture or a successful career) and downgrading (it is an upgrade in reverse — giving up new features and going back to the old/previous version).
Virtual projects or virtual teams have nothing to do with virtualisation or simulation. No supercomputers or anything like that. It’s just that all team communication takes place in a virtual office format.
A virtual project is a project that is worked on remotely when people are working out of the office or are geographically dispersed. In this case, face-to-face communication is impossible or minimal.
On the one hand, this is convenient: there is no need to organise workplaces or rent expensive offices, and working hours can be as flexible as possible. On the other hand, the quality of control, and therefore the quality of work, deteriorates. The work format of managers or team leaders becomes more complicated.
What’s it all for?
First, we have already mentioned the need to optimise structure and personnel costs. In the past, downsizing was used by large companies that had grown to unbelievable proportions. A large workforce always means a large amount of bureaucracy.
But now even small and medium-sized companies are having to downsize. The main reasons for this are the crisis, reduced supply volumes, reorientation of production facilities, radical changes in logistics schemes and much more. Even IT companies and established development teams are being forced to optimise their workforce as the market structure has changed dramatically. Major customers have left, new customers’ requirements have changed, previously used tools and frameworks are no longer available.
In such a situation, downsizing is a good thing. After all, the changes will enable the company to stay afloat, which means that most jobs will be saved.
Second, the pandemic has also had an impact. Many companies have been forced to rethink the way they work. In order to reduce risks and financial losses due to staff illness, it is logical to use remote working. Many companies are moving to virtual offices. Why keep an employee in a stuffy office when you can send them home and get the same results?
What are the different downsizing strategies
The strategies outlined below are notional. They can be used alone or in combination, in parallel or as sequential steps.
- Workforce reduction strategy. The quickest and easiest way to reduce staff costs. It can be implemented with minimal initial preparation and justification. In reality, however, an ill-considered approach can have serious, irreversible consequences if, for example, people who are essential to the production of a valuable end product are made redundant. This strategy may include internal transfers, outplacement (assistance in finding employment elsewhere), enhanced severance payments and relocation assistance (if the transferred employee has to change location).
- The strategy of rethinking work processes. In this case, it is not so much the number of employees that is reduced, but rather the volume of work performed. This strategy makes it possible to reconsider the need for certain functions, posts, whole departments, superfluous levels of hierarchy, etc. This is a medium-term strategy that implies a redefinition of the tasks of all staff units and structural subdivisions.
- Systemic approach. A strategy which is as long term as possible and which should ensure that the company and its workforce are not subject to endless change in the future. As part of a systemic strategy, all business processes should be simplified and employee responsibilities optimised.
The challenges of downsizing
Yes, downsizing has its peculiarities. In surgery, when you cut or remove something, it’s hard not to cause collateral damage to the body. The same is true in any business.
Each employee in the old roster performed certain functions, had their own points of interaction with other participants, and so on. If one of these elements falls out, the system is bound to lose stability.
The mere fact of mass redundancy can be perceived negatively by the remaining employees. It can be a signal to flee. So don’t be surprised to see your employees’ updated CVs on job search sites.
Any purges and optimisations should be as transparent as possible. The purpose of such actions should be explained to employees.
If people feel a lack of stability, they will look for a new job.
The other side of downsizing is the increased burden on the remaining employees. Old functions continue to exist. This means that other people will have to take over, one way or another.
And there is a whole range of associated problems: lack of experience, additional time to adapt and build new relationships, time for retraining/re-qualification, etc.
Challenges of virtual projects
Moving to virtual projects or offices can also be resource intensive. You need to completely redesign business processes and rethink the value of certain employee activities.
On the one hand, software solutions such as task managers, schedulers, BPM systems, etc. can help with the transition to remote working. They can take care of much of the routine: task accounting, time tracking, video recording, information sharing, history storage, files, training materials, documents, invoices and much more.
On the other hand, new software is always a new experience. So you need to get used to it, learn how to work with it and perform standard operations.
Remote working itself is a different way of working with its own subtleties.
For example, there is much less face-to-face interaction (which experience shows is essential for job satisfaction), it is more difficult to prioritise and make a clear distinction between personal or domestic issues and work tasks. If you are regularly distracted from work by everyday life, nothing good will come of it.
Yes, there should be fewer personal conflicts between employees. But remember that the absence of conflict and emotional outbursts can be perceived as stagnation. People will become bored with their work. And financial incentives will help to maintain interest in work for a relatively short period of time.
The management system should also be radically redesigned for remote work. There should be clearer and more comprehensible criteria for assessing the quality of each specialist’s work. The manager needs to seriously rethink his control plan. Online meetings need to be planned and held instead of the more convenient face-to-face interaction.
We have discussed all the problems of remote working in a separate material —
Managing remote workers, nuances and difficulties.
Instead of conclusions: to use downsizing or not?
Downsizing, and more generally any optimisation of the workforce of any organisation, commercial or non-commercial, can be a way out of a difficult situation where on the one hand there is overspending and potential collapse, and on the other hand there is a part of the workforce that needs to be made redundant in order to keep the company afloat.
Moving to a virtual office should be seen in the same light. It is the most convenient and viable format in the current environment. You just have to adapt to it properly and anticipate all the possible risks.
If all your indicators are normal, you do not need to think about virtualisation projects or downsizing.
