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Rightsizing and Layoffs

29 October, 2015 - 10:03

Rightsizing refers to the process of reducing the total size of employees, to ultimately save on costs. Downsizing ultimately means the same thing as rightsizing, but the usage of the word has changed in that rightsizing seems to define the organization’s goals better, which would be to reduce staff to save money, or rightsize. When a company decides to rightsize and, ultimately, engage in layoffs, some aspects should be considered.

First, is the downturn temporary? There is nothing worse than laying people off, only to find that as business increases, you need to hire again. Second, has the organization looked at other ways to cut expenses? Perhaps cutting expenses in other areas would be advisable before choosing to lay people off. Finally, consideration should be given to offering temporary sabbaticals, voluntary retirement, or changing from a full- to part-time position. Some employees may even be willing to take a temporary pay cut to reduce costs. Organizations find they can still keep good people by looking at some alternatives that may work for the employee and the organization, even on a temporary basis.

If the company has decided the only way to reduce costs is to cut full-time employees, this is often where HR should be directly involved to ensure legal and ethical guidelines are met. Articulating the reasons for layoffs and establishing a formalized approach to layoffs is the first consideration. Before it is decided who should get cut, criteria should be developed on how these decisions will be made. Similar to how selection criteria might be developed, the development of criteria that determines which jobs will be cut makes the process of cutting more fair, albeit still difficult. Establishing the criteria ahead of time can also help avoid managers’ trying to “save” certain people from their own departments. After development of criteria, the next phase would be to sit down with management and decide who does or doesn’t meet the criteria and who will be laid off. At this point, before the layoffs happen, it makes sense to discuss severance packages. Usually, when an employee signs for a severance package, the employee should also sign a form (the legal department can help with this) that releases the organization from all future claims made by the employee.

After criteria have been developed, people selected, and severance packages determined, it’s key to have a solid communication plan as to how the layoffs will be announced. Usually, this involve an initial e-mail to all employees, letting them know of impending layoffs. Speak with each employee separately, then announce which positions were eliminated. The important thing to remember during layoffs is keeping your employees’ dignity; they did not do anything wrong to lose their job—it was just a result of circumstances.

Key Takeaways

  • Performance issues in the workplace are common. Examples of performance issues might include constant tardiness, too much time at work handling personal issues, mishandling of proprietary information, family issues, drug and alcohol problems, nonperformance, theft, or conflicts in the workplace.
  • Employees choose to leave organizations for internal and external reasons. Some of these may include a mismatch of career goals, conflict, too high expectations, time-management issues, and mismatch of job and skills.
  • HR professionals should develop a set of policies that deal with performance issues in the workplace. The advantage of having such a policy is that it can eliminate wrongful termination legal action.
  • A mandated issue is usually one that deals with safety or legal issues that go beyond the workplace. An infringement of this type of issue requires immediate attention.
  • A single incident may include a misstep of the employee, and he or she should immediately be spoken with to ensure it doesn’t happen again.
  • A behavior pattern occurs when an employee consistently exhibits a performance issue. This type of issue should be discussed with the employee and plans taken, such as more training, to ensure it does not continue. A persistent pattern occurs when an employee consistently exhibits a performance issue and does not improve, despite HR’s talking with him or her.
  • At some point during the persistent pattern, disciplinary action will likely need to be taken. It is important to develop consistent procedures on how to record and handle disciplinary issues. Most employers use a progressive discipline process to accomplish this goal.
  • Employee separation occurs in one of three ways. First, the employee resignsfrom the organization. Second, the employee is terminated for performance issues, and third, an employee absconds. Absconds means the employee abandons his or her job without submitting a formal resignation.
  • In some cases, a severance package may be offered to the employee upon his or her departure from the organization.
  • Rightsizing is a term used when an organization must cut costs through layoffs of employees. Development of criteria for layoffs, communication, and severance package discussion are all parts of this process.


  1. What are some considerations before developing a severance package? What are the advantages of offering a severance package to your departing employees?
  2. What are some common performance issues? What is HR’s role in handling these issues?
  3. What process should you use to initiate layoffs?