Rightsizing vs. Downsizing? Big Difference!

When an organization must have a reduction in work force that is prompted by external forces, the phrase “downsizing” accurately applies. When the Congress recently mandated “4%/yr across the board cuts in military installations,” they were initiating downsizing. Other external forces that can cause down sizing include major economic recessions, natural disaster, major health problems or the death of a significant person in the organization, and/or the end of the cold war.

Downsizing is a reactive process.  Most of the time, it is a depressing, destructive process. Being put in the position of having to lay people off is not pleasant for any manager. When you are coping with downsizing, it can feel that your time and effort is nonproductive. Downsizing can be disruptive to ongoing operations because people need to spend time undoing and redoing things that used to work. Even though some people going through it feel like they have failed somehow, downsizing is not personal. It usually has nothing to do with how well you have done or how smart you are. The best way to respond to forced downsizing is usually to just live through it and get it over with as quickly and completely as you possibly can.

Although the phrase “rightsizing” has been used in some organizations as a euphemism for “downsizing” to make it seem more pleasant than it is, they are not the same thing. Rightsizing is proactive and needs to be a constant part of the process of managing an organization. To do rightsizing of an organization, the leaders first look at market needs and trends, technologies, alternative approaches, and new ideas. They focus their attention on the future and where the organization should be headed. Newly clarified or refined strategic direction often gives managers new insights about what skills will be needed within the organization to head in that direction.

Knowing where things are probably headed helps rightsizing managers make more effective hiring decisions and provides direction for training/retraining current employees who want to learn new skills to prepare for the future. Armed with clarified strategic direction, a team of managers has a sense of being centered, of knowing what the priorities are, and a better chance to create an organizational structure that is conductive to success.

In rightsizing, organizations are designed to implement strategic direction. Some departments are enlarged while others may be eliminated. Sometimes the proactive, strategic design elements of rightsizing introduces a new layer of management. However, more and more organizations are using rightsizing processes to intentionally eliminate layers of middle management as they establish the most effective shape and size of their organizations.

To sustain the right shape and size of an organization, proactive managers realize that they are dealing with a dynamic process. What is right for the organization today will probably not be right tomorrow. Rightsizing is a creative, constantly exciting process of adjusting one’s organization to be the most efficient, effective, competitive, and profitable it can possibly be.

The process of rightsizing is not immune to outside forces, but unlike downsizing it does not wait for things to happen to the organization that force reactive changes. Managers who understand rightsizing drive strategic change in a positive direction.

If “downsizing” is so reactive, depressing, disruptive, nonproductive, and impersonal, and “rightsizing” is so proactive, future-oriented, creative, strategic, exciting, and positive, how could anyone confuse the words?

One of the reasons rightsizing and downsizing become confused in people’s minds is that some passive managers abdicate their responsibilities and wait for a wave of downsizing to force them to act. For example, many military installations face a situation referred to a “creep” within their organizations. Over time, they have become top heavy with expensive GS 14 and GS 15 level managers, many of whom have too little accountability. This is one example of an internally created inefficiency that warrants a rightsizing action. Managers who do not want to face tough rightsizing decisions like this, may wait until a downsizing Congressional mandate comes along to give them an excuse (a scapegoat) to do what they “should have” been doing all along. Much of the downsizing being done in organizations during the 1990’s was due to the lack of rightsizing done in the 1980’s.

Another source of confusion is the conflicting messages being sent to organizations today. In this complex world of ever-changing external forces, even the most practiced reactive managers would not know if they were being prompted to do up sizing or downsizing. In some industries, it is difficult to tell if you are “coming or going.”

Another source of confusion between rightsizing and downsizing is the fact that many larger organizations are facing the need to do both downsizing and rightsizing at the same time.

An excellent example of an industry facing both rightsizing and downsizing is the telecommunications industry. The recession and seemingly endless series of legislative changes have repeatedly forced the Bell companies to downsize. Service that was once protected for them is now open for competition. “Inter and Intra Lata Service” are phrases that mean a great deal within these corporations.

At the same time, exciting technological advances and increased customer demand for services and choice cue the leaders within the Bell Companies to take the more proactive rightsizing approach. They cannot help but see the need to invest in fiber optic cable instead of copper wire, telecomputers for business customers and individual consumers, improved cellular service, research to find ways to expand band width, upgraded equipment and routing software (ISDN vs. PBX), training in new approaches to total quality management, and the list goes on and on.

In today’s telecommunications corporation, you can see switchboard operators being retrained for new positions since much of what they used to do is now being handled electronically. Consistent with the rightsizing approach that is particularly needed in a technically driven industry, these people are being trained in new telemarketing techniques so they can handle incoming customer service calls. The leaders within the Bell companies have wisely recognized the value of their operators’ years of experience, so as one department (Operator Service) decreases in size, another (Inbound Sales and Service) increases.

Then when another wave of downsizing hits these same telecommunications companies, a range of employees are suddenly at risk of losing their jobs. An employee who was being trained for a new position may never serve in the new role.

It is very frustrating for the managers, trainers, and staff employees alike to live through this roller coaster ride not knowing what tomorrow will bring. It is also a very expensive ride. The next wave of downsizing may actually be larger because the telecommunications companies haven’t been able to get appropriate return on their investment in their employee retraining. It is also very tempting for employees within these companies to become cynical. Afraid that they will be the next to be laid off, they may distrust their managers’ intentions when their job functions change or training begins. When employees resist change, a positive rightsizing action of training employees for the future can soon feel just like a depressing downsizing situation.

If the manager involved is not energized about the strategic rightsizing reasons behind the investment in retraining or the manager feels that his/her own position is at risk too, the manager may inadvertently contribute to the confusion. When managers act as though something is being done to them rather than they are an integral part of driving strategic change, rightsizing quickly changes to downsizing. It is like a self-fulfilling prophecy for the paranoid manager or, as the French say, “fait accompli.”

It is a tremendous challenge for leaders of today’s organizations to evaluate complex market trends, technological options, economic changes, work force demographics, and competitive threats to select their major strategies. It is an even greater challenge for those strategies to be communicated in such a way that managers truly embrace them, feel that they play a part in driving strategic change, and are designing their organizations to be the right size and shape for optimum effectiveness, efficiency, and profitability.

It is a challenge worth facing because if the executives, managers and staff employees of today’s organizations do not intentionally choose rightsizing on a daily basis, they are only left with downsizing.

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