During the Great Recession, there was a job loss rate of 16% in the US, as many companies had little choice but to downsize with the rapid downturn in the global economy.

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Profit margins were squeezed, and financial outcomes were bleak in the Great Recession - and now, close to 15 years later, we’re likely heading for another recession. Some sources believe that there’s as much as a 64% chance of an economic recession in 2023.

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To avoid the costly drain of financial resources, time, and reputation, you might find that downsizing is one of the most viable options for your business. 

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Downsizing brings with it myriad challenges, which is why we’ve dedicated this guide to addressing and proposing remedies to the most common and costly downsizing mistakes.

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Lack of Transparency

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Opening discussions about the possibility of letting employees go without engaging with the workforce often results in a toxic work environment.

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Why?

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Because by having these conversations behind closed doors, you’ll likely inadvertently send shockwaves of panic through the ranks. If word gets out, employees will feel as if you have betrayed their trust and gone behind their backs with their livelihoods on the line.

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As you can imagine, this, more often than not, is a huge misstep.

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Beyond being a PR disaster that it might be hard to recover from in the eyes of stakeholders, you open the doors to widespread criticism. What’s more, letting employees go en masse in such a fashion is likely to deter top talent from choosing your company after you stabilize post-recession.

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There’s also a risk that by dismissing employees without proper notice, you could face backlash from those that remain, and it’s even possible that key players in the company would step down from their roles.

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Recently, many of the tech giants have been guilty of laying off thousands of employees without so much as a conversation. In some cases, the only way employees knew they were laid off is through an email they received the day of their termination.

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This is a bad look for any company and can irreparably harm its reputation when there was a much simpler solution for downsizing without antagonizing the workforce.

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Solution: Transparency with employees

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Communication goes a long way when you’re facing turbulent times.

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Keeping employees in the loop about what’s happening in the company is essential if you want to keep them on board. While it may seem counterintuitive to disclose the news that you’re downsizing as it might affect morale, in most cases, employees will find this honesty refreshing.

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In many corporate environments, honesty may appear to be lacking, so by being truthful with your employees, you can create an environment that employees want to be a part of.

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Getting ahead of rumors is always a good idea, and it avoids any potential fallout as a result of employees feeling lied to.

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Excluding Employees

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Not only is it a bad idea to cut off communication with employees during a period of downsizing, but it’s also a problem to exclude employees from the problem-solving process.

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It’s all too easy to brush aside the concerns of employees and silence their voice as a workforce when there are big decisions to be made. But this is a mistake. 

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The more you suppress or ignore the voices of your employees during the downsizing process and beyond, the less aligned you’ll be as a company. If you want to take the best steps forward, it’s important to make moves as a whole.

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Solution: Invite employee input

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The employees are the lifeblood of the company, so it would be wise to consult them on major decisions that could affect their livelihoods.

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This applies both to the downsizing process and what happens next.

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If you involve employees in conversations about layoffs you could build trust, but there’s a chance you could reach an alternative arrangement, such as voluntary salary reductions.

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After downsizing, there’ll be significant decisions to be made regarding a potential restructuring of the company, individual and collective responsibilities, and the company values and priorities moving forward.

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Creating Skill Gaps

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Once the dust has settled after the downsizing process, there’s a chance that you’re left with skill gaps in your company.

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This is ironic since many companies dedicate a lot of resources to sourcing the right talent to plug skill gaps whenever they appear. Yet it’s inevitable: if you lay off a large number of employees, you could be reducing the skill range within your company.

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The worst thing you can do when downsizing is rush through the process and end up in a more precarious position than you were in before. Failure to recognize what skills and talent you might be casting away when downsizing could be a huge mistake.

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Solution: Future planning

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Downsizing shouldn’t be seen as just a response to a recession or a short-term solution for financial struggles. It can determine the future direction of your business, and as such, it’s important that you spend time planning what’s next for optimal workforce optimization.

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One of the best ways to have the foresight to avoid issues such as a skill shortage in your ranks is to carry out extensive future planning before downsizing. Granted, you may not have much time before you have to be decisive with your actions, but it’s still worth plotting out what the next few weeks, months, and years might hold for your company.

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Use Employee Monitoring to Manage Productivity Levels

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One last step you can take to offset some of the costs of downsizing is to invest in an app to track hours worked like Insightful.

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When you use the best internet monitoring software, you can monitor productivity levels throughout the downsizing process, which can inform everything from resource allocation to capacity planning. 

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By monitoring work from home employees and accessing workforce analytics, you’ll be able to make key strategic decisions backed up by data. 

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Pc monitor software Insightful allows you to:

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• Automatically track time
• Gain access to real-time insights
• Track app usage
• Monitor attendance
• Create productivity reports
• Utilize a screenshot monitor

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And much more.

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Employees monitoring solutions can help you stay the course as you navigate challenging times, and through the process of monitoring and tracking performance, you can create benchmarks and analyze trends.

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