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“Downsizing” is a word that no employee wants to hear. However, many companies choose to downsize for various reasons. Downsizing employees is likely never an easy or pleasant decision for a company to make. 

What is Downsizing Employees? 

Downsizing employees refers to when a company terminates multiple employees at the same time for a specific reason. It is a reduction of headcount which can be accomplished by laying off employees, eliminating functions or territories, or by offering employees a buyout to leave the organization. 

Companies could decide to downsize for many reasons including reducing costs and improving profits, improving operating efficiencies, adjusting resources in consideration of market demand and sales levels, or taking advantage of staffing synergies after a merger. 

Downsizing employees may be deemed necessary due to a recession, an industry decline, an increase in competition, or significantly increased financial pressure. 

The Risks of Downsizing 

While it may be necessary for a company to consider downsizing employees, that action comes with some potentially significant risks including damaged company culture, decreased employee morale, reduced job satisfaction, a decline in overall employee performance and productivity, and reduced creativity and innovation. 

How to Approach Downsizing Employees 

Use these tips when downsizing employees to accomplish this challenging activity as successfully as possible: 

1. Plan thoroughly. Make sure that downsizing is not a short-term knee-jerk reaction to a reduction in sales. Define the course of action to be taken. Try to make downsizing a single event instead of multiple sequential events. 

2. Allow sufficient time to develop and implement the downsizing plan. Don’t rush into it. 

3. Consider all aspects of messaging surrounding the downsizing. Effective messaging goes beyond termination papers and formal processes. 

4. Be transparent and honest with all employees. Explain the situation that the company faces, what will be done, when it will be done, and how employees will be treated. Don’t hold back information, disguise the situation, or downplay its impacts on individuals. Try to eliminate speculation and minimize worry and fear. 

5. Make sure that all employees are treated fairly and with compassion.  

6. Treat all employees with respect. The personal touch will go a long way toward making the outcome less painful for anyone involved. 

7. Listen to employees, Hear their concerns. Hear their fears and respond honestly and respectfully to their questions. 

8. Have a solid plan going forward. 

9. For employees that remain, work to ease their fears (“will another shoe drop?) Carefully establish new goals and new responsibilities. Work to rebuild organizational trust and confidence. Focus on the future with both realism and optimism. 

10. Keep employees focused on the important aspects of the business.

11. Be empathetic to the needs of individuals and the organization.

The Role of HR in Downsizing Employees 

HR has an incredibly important role in a downsizing. It requires dealing smoothly and accurately with payroll, severance payments, insurance matters, all termination paperwork, and more.  

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