Tips to Downsize Your Business Ethically

Have you decided to downsize your business? This must have been a tough decision. You have to make the furniture around, and it is quite difficult to lay off your employees when they are not at fault. At one point in your life, you feel that it is the necessity to downsize your company. One of the significant reasons for doing so is to save money.

When the company struggles to keep up with employees’ salaries and related expenses, it makes employees redundant when it no longer requires their services. Amid the pandemic, most of the companies are collapsing because of the plunge in revenues. It is challenging to meet overheads along with instalments of long term loans.

As a result, companies are making their employees redundant. Although you can furlough some of your employees and ask them to join back when your business bounces back, this is not always the alternative available to you.

If you have no way other than laying off your employees, you will have to be very ethical. You cannot flagrantly throw them out of your company – after all, they have contributed their skills to take your business to the level where it is today.

Determine the reason for downsizing business

There are a few circumstances when you have no choice but to downsize. You will do it even if it evokes negative feelings in employees about the company. However, you must have genuine reasons to slim down your workforce.

You cannot straightaway ask your employees to leave your company. You will have to tell them the deplorable condition of your business and why you are laying off. Before you downsize your workforce, it is essential that you know the valid reason.

Ask yourself why it will be the right decision. Do not forget to take the advice of your business partner if any. Which of the following reasons is calling for downsizing?

  • Your company is being unable to afford employees you currently have, or
  • Your workforce is running on empty.

However, most of the time companies decide to downsize the workforce because they want to pay less. You should call it off if this has led to this decision-making. If you slim down your workforce to save money, calculate the cost you will bear upon losing skilled employees.

They will not be as talented as them and will have to spend on their training programmes into the bargain. You must calculate the opportunity cost of making people redundant just because you want to pay less.

Think about the outcome of business

If you have decided to downsize, you will have to figure out the impact on your company. Think about how your company will look like after the downsizing.

  • Will you be able to run your company with reduced staff?
  • Will you need new employees to hire?
  • Will your existing staff be able to meet your mission?
  • Where do you see your company heading?

You must have the answers to all these questions before you cut your workforce.

Readjust your current staff

If you think that you have no choice left but to trim down your workforce, you will have to decide which employees you want to retain. As an entrepreneur, you would like to retain the best candidates who are creative enough to contribute to profits.

However, there are various factors you will have to consider to decide on the employees you will retain. For instance:

  • Which employees do you think to have the potential to derive more revenues?
  • What kind of product or service would you like to expand after the downsizing and which skills do you need for that?
  • What people do you think are the most suitable to work in the direction of your goals?

Communicate in person

But they do not behave compassionately. You must communicate the message to your employees politely and professionally. Just dropping an email to them or calling them in your cabin and ask they do not need to come to the office from the next day is not ethical at all.

Even though your employees are running on empty, you should decently communicate about their redundancy. If you lay off your employees through email or on the phone, your employees will feel disdainful and dejected. It will help if you communicate about it face to face. You should allow those employees to work for at least a week if they want. This will help them digest it and find a job in the other company.

Your employees might be offended a little bit, but you can handle the situation if you tell them the real reasons. If your company fails to afford as many employees as are currently working, inform your employees that you cannot afford them.

Be compassionate

Although you have genuine reasons to trim down your staff, you need to understand that your decision will take a toll on their lives. This is why you must stay calm even if your employees get flustered and slog you off. Offer sincere apologies and behave in a way that can make your staff tranquil.

Downsizing is a harsh decision. If you are doing it because you cannot afford to have all of them, you can also consider alternatives like a pay cut. The amount you save on your salaries can be utilised to meet other expenses, including repayments of unsecured personal loans.

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