The business trend of the last decades forces companies of any kind to be constantly dynamic. The recurring changes in society also require certain changes in working methods, especially in the case of a technology-based company.

Downsizing is a business strategy that was born precisely out of this need and which has so far yielded good results. Thanks to its characteristics, this technique can be implemented proactively in any type of company, as long as a precise analysis is made of the structure and the real needs of the human talent that is indispensable for the fulfilment of goals.

This type of proactive technique allows the company to anticipate changes, thereby reducing the risks involved. Do you want to know how to implement proactive downsizing in your company? Read on.

¿What is downsizing?

In general terms, downsizing means “downsizing”. Applied to business, it denotes a reduction in the size of a company, which consequently leads to a reduction or downsizing of the human talent that makes up the company.

For many critics, it is a way of embellishing the group dismissal of personnel, however, from a strategic point of view and well applied, downsizing can bring great benefits to the company that go beyond a simple labour dismissal and that translate into the provision of a better service, greater productivity and high profits.

Types of downsizing

Depending on the cause that motivates the application of the technique in question, it can be classified into two main groups:

Reactive downsizing

This is the one that arises as a consequence of a specific situation that, irremediably, forces the reduction of areas or departments of the company and, therefore, of personnel. For example: a budget cut, a decrease in sales, changes in commercial strategy, etc.

Proactive downsizing

Proactive downsizing is the one that arises preventively, anticipating possible future changes in the company’s conditions.

This type of strategy maintains the dynamism of the institution, forcing it to be at the forefront of the latest trends and to immediately prevent the impact of these trends on the normal development of its activities.

What are the characteristics of proactive downsizing?

Unlike reactive downsizing, which waits for a contingency to arise before taking action, proactive downsizing requires anticipating events, and therefore usually has the following characteristics:

  • It requires constant analysis of the company’s external conditions, which will determine the immediate or delayed implementation of the strategy.
  • It also forces the members of the institution to repeatedly evaluate the processes executed and their strict necessity for obtaining the final product.
  • It sets clear productivity parameters and standards that cannot be lowered.

Is it possible to implement proactive downsizing in any type of company?

Any company that wishes to evolve nowadays must establish different strategies, technological, commercial and, of course, business strategies. This requires constant study of its needs and the results obtained in line with the fulfilment of the objectives, mission, vision and values established.

In this sense, any type of company can implement proactive downsizing in order to guarantee sustained growth in production, reduce costs and keep within the required standards.

How to implement proactive downsizing in your company?

Proactive downsizing can bring many benefits as a business strategy, but if poorly implemented, it can also have dire consequences that can ultimately sink your company. Therefore, it is very important that you study very well how to implement this strategy. To do so, you can follow the steps detailed below:

  • Analyse the working environment (internal and external).

Before making any decisions or carrying out such an important technique as proactive downsizing, it is necessary to assess the conditions of the working environment, both inside and outside the company.

Are there reasons to downsize? That is the question you should ask yourself in the first instance. Unlike reactive downsizing, where the reason arises before the decision is made, in proactive downsizing you need to establish a real cause to start the downsizing process.

In addition, you must answer the question: can the company downsize processes and human capital without affecting production? Remember that the idea of proactive downsizing is to anticipate a change without suffering consequences, but you should not overburden staff, leave areas without the necessary human talent, let alone risk the company’s productivity.

  • Create action plans for the future

Prevention is the rule in this business technique, so that every decision for the future must be supported by an intelligent plan, which arises from the analysis carried out in advance and which is backed up by sound decisions, based on a change that requires, eminently, a reduction.

  • Consider technical and legal aspects

Laying off staff is not as simple as it sounds. Before doing so, you should check the legal conditions that apply generally and precisely to each individual employee. In this way, you will avoid possible labour lawsuits that may have legal grounds and you will ensure that you act within the framework of the jurisdiction, without undermining the rights of your employees or third parties.

  • Be sure to incensive staff

Staff who remain in the workforce may feel uncertain and insecure about this strategy, as it is normal to think that in the future they will be the ones to leave the organisational structure.

Therefore, to conclude, it is necessary to reinforce the trust and security of the employees who remain in the institution, guaranteeing them their importance within the functionality of the company and reinforcing the bonds of fraternity.

Advantages of downsizing as a business strategy

As mentioned above, preventive or proactive downsizing has many advantages, including the following:

  • It allows for cost reductions that can be injected into the company in the form of investment, improving technology, marketing strategies, etc.
  • It simplifies the organisational structure of the company and thus creates clear levels of hierarchy and responsibility.
  • It strengthens the bonds of fraternity. A small group gets to know each other more precisely, which helps to strengthen alliances, empathy and camaraderie.
  • If the right calculations have been made, despite the reduction in staff, this strategy ensures that the same results are obtained at the productive level, using less human capital and, consequently, investing less in the product.
  • Communication channels are freed up, allowing communication to be more effective and assertive. This, in turn, reduces the risk of labour conflicts in the company.
  • Costs are freed up and it is feasible to invest in the training of staff who have remained within the institution, improving their level and professionalism.

Disadvantages of downsizing as a business strategy

On the other hand, poorly implemented proactive downsizing can lead to:

  • Decreased productivity as a consequence of poor process analysis, so that indispensable positions or units are eliminated.
  • Imminent staff turnover to cover necessary and understaffed areas.
  • Staff mistrust of the company’s management.

Maintaining the quality standards and productivity of your company is a basic principle for companies. To achieve the proposed goals and objectives there are many strategies that you can implement effectively, including proactive downsizing, with which you will save time and investments in the long term.

At Melt Group we are committed to human talent and we know what they bring to the company, and we also advocate the intelligent analysis of structures and production processes, so that all the staff you hire are the ones you really need.

In this post we have given you some tips to correctly implement proactive downsizing in your company, but if you require more precise advice, focused on the particular needs of your company, do not hesitate to contact us, visit our website or our offices in Madrid or Malaga.

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