Founder and CEO of orgvue. Rupert Morrison is an entrepreneur, economist and visionary in data-driven organizational management.
Hinterhaus Productions 2016
The labor market has never been more fluid than it is today in the midst of the Great Resignation. However, for many organizations, how they hire, retain and fire is often askew. Rather than effectively planning the workforce as a business’s best route to success, most organizations get caught in a boom-and-bust cycle of hiring in the good times and firing in the bad. They fail to harness strategic workforce planning, specifically identifying where gaps lie in their workforce today that will limit the execution of business goals tomorrow.
Simply put, many decisions are made with near-sighted lenses and this lack of planning can lead to traumatic and seismic shifts in the organization, specifically in the forms of layoffs and downsizing. This is bad for a number of reasons but especially because layoffs are a sign of a business in trouble. According to an article published by Wharton Business School, “Contrary to popular belief, there’s not much evidence that layoffs are a cure for weak profits, or... that they reposition a firm for growth going forward.”
Rather, healthy businesses have learned the benefits of being adept at adapting: They are constantly evolving, and the resulting talent needs are too. Instead of looking to right their wrongs in the form of layoffs and downsizing, businesses should be constantly optimizing their workforce for both what they need now and in the future, or what we call rightsizing.
Focus On Rightsizing
While downsizing is typically a cost-cutting measure in response to a company’s financial crisis, rightsizing is the process of analyzing and planning the organization needed to deliver business outcomes. It should not be viewed as cost-cutting, but instead making sure that the right people — with the right skills in the right numbers — are in place to do the work needed today and in the future. Whereas downsizing is reactive, rightsizing is proactive. Done well, it’s a means to avoid the bad times and disruptive cost-cutting programs.
To my observation, rightsizing often combines four flawed approaches:
1. Teams have naturally evolved without an overarching design framework or controlling design principles, so the organization grows out of shape over time. Exceptions and anomalies become established and, before long, inconsistencies proliferate across the organization.
2. In the absence of a framework or rigorous planning, the allocation of resources is often most heavily influenced by “who shouts the loudest.” Resourcing decisions are characterized by politics and personality rather than assessments of need and an understanding of loading and capacity.
3. Just as wages have stickiness (once a wage is agreed, it doesn’t go down), so too does headcount. The budget is set each year based on the previous year, which is all well and good until there is a shock that demands cost-cutting and most often this is applied crudely as an across-the-board reduction, no matter what.
4. Leadership applies a magic number. For example, I often hear people say that for every 100 employees, there should be one HR representative. This is applied blindly without an understanding of the scope of their HR organization. For example, is talent acquisition done in-house or is it outsourced? How much learning and development does the company want to invest in?
Rightsizing The Right Way
Thoroughness is required in rightsizing to understand what is really needed. Decisions should be based on data connected to the outcomes you’re trying to deliver. It involves more thorough analysis and planning beyond a headcount number or salary base or reacting without control or only hearing those who are heard above the rest.
Start by asking “what if” questions. What if the growth in call volumes was 40%? What if we could increase the productivity of caseworkers by 20% through automation and/or shifting transactional tasks to another, less expensive role? This is a driver-based approach that determines what the organization needs from a resourcing and capability standpoint using a driver (e.g., number of calls) and a productivity measure (e.g., time per call). The driver is a function of business success, for example, growth in volume, hile the productivity rate is a function of factors like skills, focus, systems or bottlenecks.
Another approach would be to tackle the fixed roles within an organization — those where the headcount is not a function of volume (or revenue). This is more usually at the upper echelons of management and leadership. If the organization has become top-heavy and roles are duplicated where they shouldn’t be, this is another place to start. A question to always ask is, is there work they are doing that is better suited elsewhere?
Finally, and perhaps most importantly, rightsizing is a sensitive process for those impacted by outcomes, so it’s important for everyone to understand the approaches used. Frank and honest debate are a necessity and any objections must be founded on testable data. Get rightsizing wrong and one or two things could happen: You miss your goals and/or you end up downsizing.
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