Rightsizing, in terms of human resource management, is a process that requires restructuring an organization to fulfill the present socio-economic needs and meet the market conditions and responsibilities of the company. This can be done by redefining job responsibilities, reforming the management, and cutting costs in various ways to generate more profit under the current conditions.
While it may require letting go of some employees due to changes in job descriptions, it doesn’t necessarily have to be this scenario. New people matching the job responsibilities are hired to compensate for the lost positions, so there’s no net loss of employees. In some cases, the workforce may also expand in an attempt to increase operations, thus increasing revenue generation.
While the initial definition may make you think rightsizing is the same as downsizing, they are actually quite different. Where downsizing means cutting down the size of a workforce, rightsizing means adjusting the workforce by redefining job responsibilities based on market demands.
While downsizing is a one-time occurrence for any organization, rightsizing takes place regularly. This ensures that the organization stays up-to-date and competitive in its industry.
While the two terms may have similar meanings, they have different functionalities and intents. That’s why, when the reformation of a company needs laying off many employees to allow the right ones in for the job, the management uses the term ‘rightsizing.’
You can use four methods to rightsize your workforce to match the current demands and required skill sets. Whether you want to carry out activity analysis, ratio analysis, driver analysis, or mathematical modeling will depend on the goal you want to achieve through this action.
One of the widely used methods for rightsizing the workforce is ratio analysis, which is used to plan to restructure based on how well they utilize their resources. They carry out ratio analysis based on the relationships between certain variables, some of which are productivity ratio, yield ratio, cost per hire ratio, turnover ratio, etc.
Driver analysis analyzes what factors primarily motivate a business's operations by essentially investigating people's drives to carry on with their work. Any change in work structure will thus affect the drive of the individuals, resulting in a shift in their motivation and activities.
Activity analysis studies how efficient and effective an employee is at their job. It compares the activities the employees are doing with the activities explained in their job description.
To carry out activity analysis on employees, an organization can use a few measurement parameters, such as speed, duration of work, productivity, and how much workload they can handle. Ultimately, it will bring out the time employees spend on their job and the results they bring in.
Mathematical modeling is a difficult approach as it requires building a model to figure out how many employees are required to optimize business operations. Although challenging and time-consuming, it can provide accurate results if done by an expert. However, because of the nature of mathematical modeling, many organizations don’t employ it.
Organizations planning to rightsize their workforce should take a few steps to reach their goal. To rightsize properly, the following steps are required:
The entire restructuring process can benefit the workforce and the organization in various ways. The restructuring process will allow the organization to:
Employees can also benefit from the restructuring of the organization in the following ways:
No matter the benefits the restructuring offers, it poses certain challenges to the organization, from affecting its image to posing legal threats. It may even cause the organization to lose some valuable clients. The following are the cons of the process: