How to downsize?
Hiring Freeze vs Redundancy vs Paycut/Reduce hours?
How you answer this goes to the heart of your business strategy. Because even in these tough times of downsizing, your business strategy is inextricably linked to your people strategy.
In this post I'll look at the hiring freeze.
The theory: Stopping hiring doesn't mean that people stop people leaving, so you let natural attrition do the work for you until you reach your desired resourcing level.
The upside: You don't have to make a decision - its made for you. Also, it is in many ways more humane, as you are not forcing people out of paid work. It's also good for keeping the company out of the press and away from criticism.
The downside: You don't control who stays and who goes. Darwinian principals tell us that the strongest (best) will be those who can leave and find opportunities elsewhere, while the weakest (not so good) will have little chance of finding other work in a weak employment market. So you end up with both a smaller and qualitiatively inferior workforce in a tougher economic environment.
Also, you can't control how quickly people will leave so you won't know how long it will take you to reach your ideal reduced state.
What is the strategy behind this course of action?
1. A strategy to do the right thing by your loyal workers and keep all of those who want to stay employed, in a job (no matter the associated business consequences); or
2. A strategy that accepts the organisation will get weaker in the short-term, and maybe taking the quality of your workforce more seriously again in the future when times pick up; or
3. No strategy/avoiding making a decision/hoping for the best.
Imposing a hiring freeze as a short-term measure (ie 1-3 months) is a legitimate course of action that will not have far-reaching impacts for an organisation.
Any longer than that, and an organisation is by default or design embarking on a "people" strategy that will impact on the business strategy.
This will be reflected in financial performance as well as reputation (both positive, and negative).
HR has such a strategic role to play no matter the market conditions.
Make sure your business imperitives drive your HR decisions, or your HR decisions (or lack of) will drive your business performance for you.