Rightsizing in business: what it is and how to do it

While the prospect of reducing or restructuring your workforce may well be something you dread, it’s important that business owners regularly evaluate whether the employees on their payroll are best placed to meet the company’s goals.

In the early days of a business, it can be tricky to understand how each role will fulfil these goals. Over time, what is and isn’t working becomes clearer, and this is where rightsizing can come into play.

This article will look at what rightsizing is, the benefits and risks of the process, and how best to approach this emotionally difficult task at your business.

What is rightsizing?

Rightsizing in business is the process of reorganising and restructuring a company with the aim of boosting efficiencies, meeting new goals, and potentially saving money. In most scenarios, this may involve hiring new talent, making staff redundant, and/or reorganising team structures.

It may seem confusing that rightsizing can involve both hiring new roles and cutting back the existing workforce. This is because the process of re-evaluating team structures and purposes may end with some roles being deemed unneeded, while also creating new gaps that need filling.

The key aim of rightsizing is to tighten up productivity and financial output to ensure all staff are working towards the key goals of a business.

Restructuring teams and making roles redundant can understandably produce feelings of uncertainty, stress and low morale in the workforce, so it’s important to approach the process with care to ensure only the right decisions are made.

How is rightsizing different from downsizing?

While rightsizing and downsizing can both refer to reducing team sizes, they are different.

Downsizing tends to be an emergency measure in response to sudden economic pressure – for example, if a business loses a key client and therefore a large chunk of income. Downsizing focuses solely on reducing the workforce to save money on payroll and so free up much-needed cash.

While rightsizing can involve redundancies, that isn’t its sole purpose – as mentioned, rightsizing can involve hiring new staff, too. This is because the key focus of rightsizing is to improve productivity and efficiency, rather than saving money in an emergency situation.

What are the benefits and risks of rightsizing?

Rightsizing is a significant decision making process to undertake for a business, so it’s important to understand the pros and cons that come with it before getting started. Let’s look at the benefits:

• A renewed focus on company goals
• Better use of employee skills
• More efficient processes and workflows
• Reduced employee wages and payroll service costs
• Reduced chance of sudden redundancies in the future

Rightsizing is a process that shouldn’t be rushed by business leaders – if it is, it can create further problems. Some of the risks related to rightsizing include:

• Losing talent that you may later regret
• Making changes that only show benefits over time – and those benefits not coming to fruition
• Poor team morale
• Making too many people redundant, which could look like downsizing and may tarnish your business’s reputation

The latter point is particularly important to consider. A damaged reputation through sudden staff reductions could make clients nervous about doing business with you, and talented candidates nervous to apply to work for you.

How should I approach rightsizing?

Now you understand what rightsizing is, it’s time to consider how to get started. There are three key steps to follow:

1. Define and understand your goals

It’s important to first think about your company’s goals and why you’re considering rightsizing. Is it taking too long to reach a crucial goal? Do you want to set a new goal that will call for different skills and processes to reach? Knowing the answers to these questions is essential before you start looking at your team.

2. Evaluate your workforce structure and requirements

Once your business’s goals have been finalised, it’s time to take a deep dive into your workforce. A renewed approach to your goals may make some roles redundant, while also creating skills gaps that need to be filled by searching for new talent.

This internal audit is also an opportunity to highlight underperformers who won’t help the new structures or workflows succeed – or, more positively, look at overachieving staff who could be promoted to fill the gaps you’ve identified. This removes the time and costs associated with the hiring process, too.

3. Plan for and implement the changes

Implementing your rightsizing plan is a huge step, so detailed planning is absolutely essential. If possible, engage with your senior team about the proposed plans before the implementation stage to get their thoughts.

If your rightsizing strategy involves redundancies, there are two ways to approach this – either via speaking to those individuals one-on-one before addressing the whole company, or vice versa. There are pros and cons to both approaches:

1. Speaking to the whole company first gives everyone equal awareness at the same time of the why and how behind your plans. However, this is likely to create anxiety amongst the whole workforce as they await news of whether they are impacted by the layoffs.
2. Speaking to impacted employees first lets them know as soon as possible and reduces widespread panic across the entire workforce. However, the impacted employees may feel shocked or blindsided if they are called into a meeting and given this news without fair warning that redundancies are on the table.

There are rules/processes you need to follow as an employer when making staff redundant regarding topics like notice, pay and consultation periods. You can find advice on this via the government website.

There are benefits and downsides to each approach, and there is no right or wrong answer – although doing all meetings face-to-face is advisable. Speaking to your senior team will help guide you as to which approach is best for your business.

Redundancies and restructures are always going to cause upset – that can’t be avoided. However, you should make sure that you communicate the reasoning behind them clearly, and be prepared to answer any questions that people have. Treating those affected with compassion and empathy is important.

Final thoughts

Rightsizing isn’t an easy process and is further complicated by the human element involved – no good business owner wants to upset their staff, or put them in a state of financial uncertainty through layoffs. However, the nature of being a business owner is making tough decisions, and regularly evaluating whether the staff on the payroll are serving their business in the best way possible.

There is also the positive side to rightsizing – new talent or new team structures can bring a fresh perspective to your business, and a renewed focus on key goals will give a boost to the operation. When approached with care, rightsizing offers businesses the opportunity to thrive and grow.

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Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, UKTN and Maddyness UK. She also works closely with agencies to develop content for their startup and scaleup clients.