Discover how resource management can provide alternatives to layoffs – even in times of economic uncertainty or a business downturn.
No one wants to lay people off. It’s disruptive to business and distressing to individuals. And yet log into LinkedIn and you’ll see a slew of redundancies.
For many organizations, there is a better way. Appropriate resource management and capacity planning can help businesses avoid a boom-then-bust approach to recruitment – rightsizing the workforce to match demand more accurately.
The revolving door of reactive hiring and firing can be a dizzying experience. Without proper capacity planning, organizations can be surprised by increased demand. They rush to hire new staff to meet it. Only to lay them off again when demand subsides. Repeat ad infinitum.
This approach creates multiple issues. Not only is it expensive – often bringing in last-minute hires at inflated rates – but it’s disruptive to operations, drains employee morale, and damages your employer brand.
"Oh, those guys? They’re always hiring. I’d steer clear…"
At Runn, our hearts break every time we hear about layoffs, especially when we know there is another way. So here are eight ways better resource management can help you break the hire-fire cycle.
But first, a story from the frontline…
In one of our recent webinars – Measuring Success in Resource Management – David Edwards, Head of Workforce Planning at Ericsson, shared an inspiring story of how resource management came to the rescue, preventing a ton of job-loss misery, and saving a lot of money:
I worked once for a large financial services institution and we had a situation where a significant number of people would be subject to restructuring, which is another way of being let go from one part of the business fast.
Other people were being hired in from a different part of the business who could actually do pretty much the same job. And of course, every time you let somebody go, you create damage. Financial damage. Reputational damage. And damage to the morale of the workforce that remains in the company.
I felt there was a lot to be gathered by looking at the data more closely. It was my first real encounter with people data and I had nothing but XML to work with, to join up several different systems. But what I found was quite shocking…
We had something in the region of 900 people who were let go - but we were hiring a corresponding number of temporary staff in the same roles in different parts of the organization. So I booked an appointment with the COO and he said ‘Why? No! This is no good!’ And that set me on a path to identifying how we might do things differently.
And my route into that initially was resource management. We created a sort of 'dating agency' between people who are at risk of redundancy and departments looking for more staff. We did that 600 times and saved the bank about 45 million euros.’
Hear the full story from David first-hand ➡️
Layoffs are disruptive and damaging, as David Edwards identifies above. "Every time you let somebody go, you create damage. Financial damage. Reputational damage. And damage to the morale of the workforce that remains."
David’s redundancy reduction program saved his employer 45 million euros. That’s because layoffs have direct costs - such as redundancy pay and severance packages. And if you’re also hiring new staff unnecessarily, you have new labor costs, plus recruitment and onboarding expenses too.
Workforce reductions disrupt operations because your business is now operating with fewer staff. Even if those roles were surplus to requirements, you’ll need to redesign processes that involved them and embed those with the remaining workforce, which takes time.
When you let people go, you lose the institutional knowledge those workers had built up – while also having to onboard any new hires and familiarize them with your company's culture, clients, and quirks (i.e. the stuff that becomes second nature to employees with long tenure in your company).
This is why new staff members can take longer to achieve competency than retrained employees.
Frequent layoffs damage the morale of your remaining workforce, who’ll be wondering how secure their role is. This can lead to disengagement and a range of negative outcomes – like reduced productivity, increased absenteeism, and higher turnover through pre-emptive job changes.
A classic study in the Harvard Business Review found that a 1% downsize can increase turnover by 31%.
Workforce reductions also make it harder to recruit. Like existing employees, candidates want stability and growth.
Gallup found 53% of job seekers consider stability a key factor in new roles – no one wants to join a company with a reputation as a revolving door. Another study found that 70% of companies reported a negative impact on future talent acquisition efforts – and 81% reported a negative impact on the brand – after layoffs.
Fortunately, one of the benefits of better workforce planning is that it reduces the need for layoffs. And we’re here to show you how…
Laying staff off isn’t inevitable – and neither is the endless cycle of firing and hiring new employees. Resource management techniques, tools, and data offer a powerful antidote to redundancies.
Effective resource management optimizes your workforce, minimizes redundancies, and surfaces spare capacity you didn’t even know you had.
It improves visibility into supply and demand in your organization, so you can meet demand efficiently and cost-effectively, and it makes you more agile during economic uncertainty.
Here’s how…
Let's get started with the excellent example from David Edwards, above. With the right knowledge, there is huge scope for retraining and redeploying employees who would otherwise be made redundant.
To achieve this, you need centralized data on:
This will help you spot opportunities to retain, retrain, and redeploy employees where they’re most needed. A resource management platform is a great place to start for actionable employee data and reports.
The most obvious way resource management techniques can reduce the need for layoffs is through strategic capacity planning. This is the process of forecasting future demand for your product so you can ensure your business has the right type and number of people – and mix of skills – to succeed.
Better capacity forecasting lets you right-size your workforce so you can deliver work efficiently, without overspending on staff.
This more strategic workforce planning approach gives you more time to consider the most beneficial way to deal with fluctuations in demand. For example, if you anticipate a drop in demand, you can proactively implement hiring freezes beforehand, rather than reactively laying people off when it arrives.
Learn more: Getting Started with Capacity Planning ➡️
Scenario planning is an essential element of capacity planning and risk management. It allows you to compare the impact of different business scenarios on – among other things – your workforce. This lets you work through different opportunities and make more informed decisions.
For example, will Option A result in reduced resource demand for one type of role and prompt layoffs? Would Option B be better overall because it doesn’t require the disruption and risk of major redundancies?
After all, redundancies don’t always save money. Harvard Business Review reports that "the short-term cost savings provided by a layoff are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation."
With access to skills management data – the skills you have vs the ones you need – you can begin cross-training your employees. Cross-training is about giving employees skills that they can use in different roles within the business. This could be through formal training – like internal and external courses – or diverse work experience and internal mobility – such as secondments and job rotations.
This approach means that when demand decreases in one area, employees can shift to another department that is still busy. This avoids the need to reduce headcount in one area while recruiting in another – avoiding two lots of unnecessary expenses.
Resource utilization is all about making sure you’re using your capacity in the most productive way possible – so that workloads are well-balanced, no one is desperately overworked, and there’s no spare capacity going to waste.
It’s clear that this is the optimum way to run a team and get the best ROI on your investment in your people. Now imagine that across every individual, team, and department in your organization – everyone working to a comfortable 85% capacity, maximizing productivity while leaving enough leeway to tackle the unexpected.
This dream scenario reduces the need to lay off underutilized workers – or hire new workers for excessively busy teams – because you can rearrange your existing workforce to meet demand.
Learn more: What's the Problem with 100% Capacity Utilization Rate? ➡️
But this isn’t a pipedream. Lots of businesses achieve this through effective capacity planning, strategic workforce planning activities like cross-training, and actively monitoring and managing utilization.
A resource management platform makes it easy thanks to utilization reports, capacity assessments, and bench reports, plus lots more.
When you’re considering making people redundant, it typically means you have more supply than demand – more people than you can use. So why would you want to surface even more capacity?
Well, what if having a little EXTRA capacity opens up new opportunities? Say you have ten UX designers that you can’t find enough work for. What if – through monitoring skills and utilization – you find out there are other staff elsewhere in the business who have experience with UX research and analysis - and they’re currently being under-used?
Bring them all together and you might have enough resources to build a whole new team and pursue profitable new opportunities…
Role design is concerned with creating roles more mindfully and strategically. Instead of just recruiting to the same old roles because that’s what you’ve always done, it’s about designing roles to meet your current strategic objectives – such as to avoid layoffs.
In this scenario, role design could be used to create more flexible cross-functional teams. These teams can move where demand is highest and make your workforce more agile and responsive to shifts in demand.
But it’s not just about what’s best for the business. Research shows that well-designed roles increase employee engagement, productivity, and innovation. And engaging employees in the role design process – so it matches their interests and ambitions – further increases satisfaction. So if you do end up at your last resort and redundancies are unavoidable, you’re at least starting from a place of higher employee morale.
If you are in a position where layoffs look inevitable, talk to your resource management team. They know your employees better than anyone – it’s their job – and may be able to broker solutions that reduce the need for some layoffs.
For example, they may be aware of people who would like reduced hours or a job sharing agreement, or people looking for early retirement or to relocate.
Through their in-depth understanding of capacity, demand, and skills in your business – and the sheer volume of resourcing data they have access to – they may also be able to spot trends and opportunities you hadn’t thought about.
