Using workforce optimization to survive a recession

With tough economic conditions forecast for this year, many businesses have found themselves scrambling to prepare for a recession. Business leaders remain fixed on how to manage the economic downturn and on taking quick actions to reduce risk.

In that context, our latest research shows that snap decisions with cost cutting in mind can have unintended consequences longer term that organizations live to regret. Acting in short-term interests at the expense of future performance is no longer a strategy that stands up in today’s turbulent business conditions.

Even in situations of crisis, short-term changes should support long-term outcomes, especially when it comes to people. Ensuring the right people are doing the right work at the right cost can help businesses not only survive a recession, but position it to thrive afterwards. This is where workforce optimization comes in.

What is workforce optimization?

Workforce optimization is the process of using data analytics and modeling to improve the effectiveness of a company’s workforce. It involves examining roles and positions to identify changes that can improve productivity or help manage costs. The goal is to balance cost reduction with making sure the right resources are in place, so your organization can adapt to the fast-changing economic environment now and in the future.

Workforce optimization is used to create a high-performing, engaged workforce that aligns with and supports the company’s business objectives. It takes into account factors such as performance, skills, and availability of talent to reduce gaps in supply.

Companies with readily accessible data on skills, competencies, and work are best placed to make informed decisions to address areas of poor performance or low productivity, and to invest where skills are in demand.

Essentially, workforce optimization will help you:

• Identify the roles and positions your business needs as it adapts to new market conditions.
• Draw on techniques like skills planning, role redesign, and activity analysis, as well as strategies for retaining critical talent.
• Plan and build an adaptive workforce that can quickly respond to changes.

The goal is to balance cost reduction with making sure the right resources are in place, so your organization can adapt to the fast-changing economic environment now and in the future. When facing a market with a weak economic outlook but a While the focus during times of weak economic outlook may be on downsizing the workforce as a route to cost reduction, there’s another way to look at workforce optimization that’s shifts attention to the demand and supply of skills: ‘rightsizing’. This strategy allows you to retain the right talent by making informed workforce reductions that don’t undermine the future productivity of the organization.

Rightsizing for recession

Rightsizing is the process of restructuring an organization to meet new or updated business objectives and improve efficiencies in operations and profitability. It involves analyzing the company’s goals, resources, and workload to determine the optimal number of employees and the skills needed to do the work that will achieve those objectives.

Organizations will usually rightsize their business by reducing their workforce, reorganizing upper management, cutting costs, and changing job roles. Rightsizing is a more tailored response to changing market conditions and can help your organization withstand necessary workforce reductions without risking the long-term health of the business.

Rightsizing can be a difficult and complex process, but it has several benefits that make it worthwhile. It can help an organization:

• Minimize redundancies, which can stem the loss of critical talent, whereas downsizing will often reduce workforce using blanket cuts to headcount
• Make better hiring decisions by placing emphasis on skills gaps in the workforce
• Create greater efficiency and in turn profitability for the business.

Fundamental to rightsizing is activity analysis, which links people data to task data, so you can see the cost and effort of each activity and which roles perform them. Activity analysis forces you to look past what you think individual roles are doing and clearly see the tasks that happen day-to-day. It helps you understand the work in detail, so you can purposefully redesign roles to create a high-performing organizational design.

By being more specific about skills and responsibilities in relation to roles and positions, leaders can be more confident in identifying where to reduce cost in the short term without causing long term damage.

How can we optimize our workforce?

If your organization is facing tough decisions in this time of economic volatility, figuring out what work is essential to your business objectives and where you have critical skills gaps will help inform your decisions. Having this clarity will help you balance short-term cost cutting with long-term productivity and growth. This balance is something our CEO Oliver Shaw discusses in this article.

It’s important to say that while workforce optimization won’t help you avoid reductions altogether, it will help to minimize talent losses by bringing more detailed skills analysis into cost-cutting decisions. When you’re facing cuts in workforce, make sure you take into account the organization’s longer term strategy and consider whether skills redeployment is possible. With the right data, you can model a range of scenarios to assess the impact of any cuts before you make them.

Short-term gain can cause long-term pain

An optimized workforce is an agile and adaptable workforce, ready to respond quickly to changing market conditions without losing sight of the work that needs to be done to meet business objectives. If you’re too hasty to make workforce reductions, you may well undermine future profitability and live to regret those decisions.

By reframing workforce reduction as workforce optimization—making good decisions based on the right data insights, rather than indiscriminate cost-cutting—and taking a rightsizing approach, you’ll be able to identify your most valuable talent and critical skills, and reshape your workforce to weather the economic downturn and emerge in a stronger position in the future.

What next?

Begin your workforce optimization journey by applying for our free two-hour optimization workshop and learn how to quickly spot high-priority opportunities to remove cost from your business without losing critical skills for the future.