Downsizing Decisions: A Difficult and Delicate Decision in Challenging Times

Frustrated workers

As the economy shifts, businesses often face the need to cut costs. One area of a business that produces significant costs are employees. The high price of base salaries, benefits, and retirement plans can lead to complex and difficult reductions in staff. This decision is difficult, especially considering the current scarcity of qualified employees. When making the decision to downsize, several factors come into play.

First, it is essential to assess the value employees bring to the business. You can recognize employee value in terms of knowledge, versatility, and work ethic. Individuals having valuable expertise and adaptability should be given careful consideration. Legal considerations must also be considered. Tenure, age, and race should all factor in. Striking a balance between business needs and legal obligations is crucial to minimize potential legal ramifications.

For example, if you find yourself in a situation where the highest-performing and most versatile employee is younger than their counterparts. In that case, you may be able to justify retaining the younger employee. It’s imperative to maintain documentation that supports your decision-making process. Developing a comprehensive plan that outlines the criteria for each reduction is highly recommended. Consistency in implementing this plan is also key, particularly when legal issues may arise.

Before 2002, I worked for a company that did not have a standardized approach to reductions. Our business model relied heavily on hiring and firing based on project loads. When we went through downsizing without an established plan, we encountered legal challenges from employees and their attorneys. Our inconsistency allowed room for complaints, as each employee received different treatment. 

Once we implemented a consistently applied plan, attorney calls became a thing of the past.

Throughout the entire downsizing process, it is important to treat people with respect, empathy, and professionalism. The individuals affected by these decisions are in a difficult situation and providing them with proper treatment can make all the difference.