When it comes to maximising efficiency, most organisations today cling to the idea that they need to reduce their people cost to improve shareholder value. When it approaches the time of year when budgets are reviewed and results are scrutinised, it’s no surprise that so many pull the brakes on hiring or go full steam ahead with redundancies.
In an environment of continual cost pressure, defending your headcount is a must for any leader. Here, we’ve shared our do’s and dont’s for this – to help you avoid future headaches and make kinder decisions if things do need to change.
Time and time again, we see organisations get lost in the ‘cost management’ haze and cut their teams according to arbitrary targets. Their remaining employees then assume more responsibility to bridge the gap, and the need for extra hands creeps in like clockwork.
If you’re proactive, you may be able to avoid this nightmarish cycle. Start by defining your vision for the year ahead and then cherry-pick the capabilities needed to achieve it. If your roadmap aligns with your business’s reality, your headcount should be able to defend itself.
You also don’t need to wait until the financial year ends to assess your performance and evaluate your setup. Becoming clear on your future objectives and roadmap before the crunch point means you’ll be in a stronger position to avoid making reactionary redundancies which have a detrimental human impact.
Unfortunately, at times you might still need to reduce your headcount or make changes that impact people’s roles. Economic uncertainties arise and circumstances change. But hacking at your headcount without a clear strategy won’t strengthen your chances of withstanding these adversities . Moreover, applying hiring freezes can inhibit your performance in the most business critical areas where talent competition is high.
Instead, think critically about the roles and skills that support your competitive advantage. What strengths do you need in the future? Which types of roles will become the most important over the next few years? With your business objectives as your North Star, you can take a more mindful approach to reducing or redistributing your headcount.
This is much more impactful than making cuts proportional to department size or removing a blanket percentage across the board, so don’t discount your data. From employee engagement or exit metrics to business and functional performance, gathering on-the-ground insights is key to staying agile.
Evaluating your headcount from the top down is wise, but be wary of creating executive immunity. We’ve seen many organisations strip out lower-level roles (perceiving them to be less strategically valuable) and end up too top-heavy as a consequence.
Think for a moment about your current leadership cohort. Are they positioned to gear the business towards its objectives? Bearing in mind that your leadership team will have a higher cost per head, are there capability overlaps that need to be addressed or gaps that need to be filled?
Having these conversations isn’t always comfortable, particularly when it requires a level of self-awareness from you and the rest of the leadership team. However, designing an organisation with a sustainable structure is the priority, not protecting your execs.
When it comes to restructuring teams, not every cost is a tangible one. Common sense tells us that redundancies can affect our employees’ sense of security at work, but research suggests that it goes further than feeling temporarily unsettled. In fact, 2020 research from Gartner sees a correlation between cost-cutting initiatives like “reduced headcount overall” and lower employee experience and engagement scores.
This is a convincing argument for defending your headcount, or at least being mindful of where you do make changes. But how can you mitigate the psychological costs of redundancies if and when they become inevitable?
1) Avoid “slicing and dicing” your headcount without a contingency plan. Downsizing your team without establishing new expectations or workloads is unlikely to yield positive results and will only build resentment.
2) Be transparent about your approach. You could lose credibility if you let people go without sharing your decision-making process with the wider team, particularly if the most impacted populations are not at the leadership level.
If you do need to restructure your team, do it kindly. You can check out our thoughts on how to approach this in a people-centric way here.
Being guided by consistent policies is beneficial in many ways. It’s why we have them, after all. Nevertheless, transparency and sensitivity will always go a long way when it comes to reducing the size of your organisation and yes, saying goodbye to some valued employees.
Rather than opting for redundancies right off the bat, try to find opportunities for your most at-risk employees to segue into another role. If someone’s role has evolved beyond recognition, they might value having the chance to choose between redundancy and sideways progression rather than automatically be put at risk.
When you step back from the bureaucracy and look at your HR policies through the lens of your people, you have a chance to improve your team’s efficiency while also ensuring you’re getting the most from your people investment. It’s a win-win.
When there are gnarly challenges to solve and difficult decisions to make, we’re here to help you prioritise your people and purpose. Get in touch to learn more about our bespoke business consultancy services and how they’re built to arm you for the future.