How to effectively downsize a business?

By Maria Alhais

Sun Tzu once said ‘’In the midst of chaos, there is also opportunity’’. During a downsizing, the company faces not only the urge to save their business but also, the need to motivate the ”survivals” of this strategy. It’s important to have clear and transparent internal communication for downsizing to work. If you and your company are planning to downsize your business, this article will help you to understand which steps should you take to effectively downsize it.

As we all know, 2020 and 2021 was a year marked by this sort of chaos, specially for small and medium-sized business. However, we must look for those opportunities to strengthen and above all, keep ourselves standing.

Something pretty common in business since the outbreak of CoVid-19 was the reckless attempts of enterprises to make the most of their profit and keep their losses to the minimum. Downsizing was the option for many.

But what does it means to downsize your company?

Downsizing means the set of activities carried out by the management of an organisation to improve its efficiency, productivity and/or competitiveness. They often involve staff reductions, although not limited to this aspect. 

The three common downsizing strategies are workforce reduction, work redesign, and systemic strategy. If your company is looking for this solution to overcome their problems, firstly you must consider if you’re looking for a long term or short term solution. 

If your business’ main goal is to have a significant impact as soon as possible, then you should take radical measures, once you will want to change what already exists. 

For a short term solution, the suggestion is to reduce your company’s workforce. This will be more eficient hence it will immediate solve the current problem you’re facing.

If, on the other hand, you’re downsizing your company as a long-term solution, you should consider applying a systemic strategy. This approach implies change in responsabilities’ roles, redefinition of roles and the definition of new priorities.

But how can you effectively downsize your business? Here are some important steps!
  1. Planning: What is your main goal? How are you planing to do this? Will this strategy take effects immediately or will it only have a long-term effect?
  2. Setting goals: What do you want to achieve? When do you want to achieve it? 
  3. Gathering facts and figures: Collect all the important data that will help you understand your business in depth. This will help you understand which are the departments or areas that need to be affected the most.
  4. Identifying opportunities: After gathering your facts you’ll better understand which areas you’ll have an opportunity to improve in your company.
  5. Improvements planning: Now that you have all the necessary information, you can improve your first planning.
  6. Implementation.

The application of Downsizing can generate consequences for the company involved when it is applied in an incorrect or disorganised manner. It is necessary to follow the steps correctly- to reduce costs, increase profits and increase productivity, effectiveness and efficiency.