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Rightsizing

What is rightsizing?

Rightsizing is the process of a restructuring an organisation by cutting costs, reducing employees, or reforming upper management. The goal is to streamline the company altogether, so that it can generate more profit. Technically, the phrase refers to a company's response to market conditions, which might theoretically include expanding its employees.

The phrase "reorganisation" or "restructuring" in IT (information technology) refers to the act of reorganising or restructuring an organization's network, IT infrastructure, data centre, storage, hardware, or other components to maximise the value of such services.

What is difference between downsizing and rightsizing?

The difference between downsizing and rightsizing is that where the former entails reducing the workforce, rightsizing entails simply adjusting the workforce to the appropriate size - which could also involve increasing the number of employees (in a rare case). Rightsizing is a process that an organisation undergoes on a regular basis, whereas downsizing is a one-time event. Any company that labels layoffs 'rightsizing,' but only for a limited time, is most likely downsizing.

Downsizing and rightsizing have nearly identical meanings. Some would argue that the word rightsizing is only a metaphor for mass layoffs. Instead of informing them that huge layoffs are imminent, emphasising that it is now time for right sizing of workforce seems less severe.

What are the rightsizing methods?

1. Ratio analysis

Ratio analysis is a highly widespread technique for right-sizing that is employed by almost all organisations. It's a collection of comparisons. The span of control for each position in the organisation is calculated using the ratio. It provides the organisation with a clear picture of how many people are needed based on each department's workload.

2. Activity analysis

Activity analysis is a study of how much time each person devotes to their primary pursuits. What people actually do against what their job descriptions claim they do, which are both gathering dust in a drawer. Job titles aren't particularly useful. As a result, the observation approach can be used to calculate how much time employees spend on their jobs. This will provide information on the optimal number of workers required in the organisation.

3. Driver analysis

Ratio and activity analysis are both extensions of driver analysis. This strategy investigates the motivations or drives behind people activities. Because any change in these parameters will result in a shift in personnel activities. For example, the quantity of calls, call flow, service levels demanded, talent required, and so on are all drivers for a call centre. These drivers will supply information on the quantity of people who are truly required in the system.

4. Mathematical Modelling

This approach is the most difficult of the bunch. Mathematical models are created as part of this process to calculate the exact and precise quantity of workers necessary in the organisation.

Steps involved in rightsizing organizations

1. Conduct structural diagnostics

The first step in the rightsizing process is to perform a thorough examination of the company's current structure. Understanding the current condition is crucial because you cannot offer appropriate changes, initiatives, and objectives, or rightsizing without first understanding the current situation. As a result, performing a thorough investigation is critical. It will aid the organization's understanding of each role's purpose.

2. Identifying key roles of employees

Businesses should also be aware of the goals of each function inside the organisation. The first question any senior management will address is if each role in the organisation is justified. Every position, every title, is linked to a set of precise goals that must be met.  

3. Defining job operational requirements

Prior to beginning the rightsizing process, management will perform a thorough investigation to determine the role-objective fulfilment ratio.  The company will then try to figure out if the individual has the requisite abilities and experience for his position. They will be subjected to a series of interviews before receiving performance scores.  

Organizations must also downsize in order to avoid errors of effort. It is a waste of the organization's resources if two distinct employees are executing the same task and end up accomplishing more or less the same thing.

4. Adapting to the change as needed

Employees may become anxious and unsure about their place in the organisation when the rightsizing process is applied. This uncertainty may lead to the departure of some high-performing staff, producing even more anxiety among the remaining employees. As a result, the company must comprehend the link between rightsizing and employee retention.  

The ideal strategy is to maintain open lines of communication with your team and keep them informed about the right sizing of workforce. This is to guarantee that there are no misunderstandings or employee assumptions about rightsizing.

Benefits of rightsizing

Rightsizing of workforce is only done when firm management believe it is the best path to take in terms of overall benefits. Among the advantages are the following:  

  • Boosting profits  
  • Getting rid of redundant procedures  
  • Increasing the number of people on staff in order to achieve objectives  
  • Reducing the number of people that get laid off  
  • Getting better equipped for the company's future prospects

What are the challenges with rightsizing?

1. High attrition rate

Most of the time, restructuring causes job uncertainty among existing employees, resulting in substantial attrition rate. It is even more critical to effectively manage rightsizing because attrition of personnel from high-profit areas or departments is detrimental to the firm. As a result, management must ensure that rightsizing does not result in excessive attrition in the firm.  

2. Offer drop out

If the news of the rightsizing is broadcast in the media or shared on social media, it may influence the decisions of candidates who have been invited to join, as well as cause offers to be withdrawn. Clients can also cancel their project because the firm secures multiple jobs because they have professional expertise.

3. Lengthening of the Recruitment Cycle

Rightsizing organizations has a detrimental impact on the organization's brand image. It presents a number of issues for employers in terms of recruiting and selecting new employees, since prospects are hesitant to join a firm that goes through such a process.  

4. Physical Security Breach

Affected employees may also express their dissatisfaction by causing physical harm to the company. They engage in activities such as destroying an organization's asset or property.

5. Data Security Breach

Information is a vital asset for any company; without it, it would be impossible to function. Affected personnel have a tendency to leak crucial knowledge to competitors, which might result in more losses for the company. As a result, employee discontent is frequently a threat to data security.

6. Legal Package

If not handled properly, rightsizing organizations might become a legal liability.  

7. Existing Customers

Because every employee interacts with customers, another difficulty is to ensure that no incorrect information or misinterpretation reaches existing clients, thereby jeopardising their business relationships.