HR Glossary | What is Rightsizing?
Rightsizing is the effort to guide an organization into the appropriate size and structure for its current and future business operations.
What is Rightsizing?
Rightsizing is a term used to describe a business’s efforts to gradually guide an organization into the appropriate size and structure for its current and future business operations.
“Downsizing” became one of the most recognizable and dreaded terms during the corporate golden age of the 1980s, and it has retained a place in the popular economic lexicon. The term conjures up images of mass layoffs and branch closures, the last-ditch efforts of a dying company trying to cut costs.
Indeed, the primary motivation behind downsizing is to cut costs in order to make a company more profitable, turn a money-losing venture profitable or just stop the bleeding for an organization in dire straits.
Fewer people are familiar with the term “rightsizing.” Based on the definition above and the general idea most people have about the meaning of downsizing, the two terms may seem to represent essentially the same thing.
Rightsizing may be driven in part by reducing costs, but it’s generally not the primary driver, and the term “rightsizing” isn’t just a euphemism for downsizing. Rightsizing is about making a company’s workforce more efficient at pursuing the company’s line of business. This might involve layoffs, but it could also include reorganization, moving staff from less-profitable business lines to more profitable ones—or it could involve retraining existing staff to be better at their current jobs. When it comes to adjusting staff size, that could mean laying off workers, but it could also mean allowing the workforce to reduce naturally through attrition. It could even mean hiring more workers in some situations.
A Gradual Approach
A key element of rightsizing is that it’s more of a gradual approach to workforce management when compared to downsizing. Downsizing is often a swift reduction in a workforce through layoffs. Rightsizing is often more about strategic long-term planning than the crisis management that tends to trigger downsizing. Because of the gradual nature of rightsizing, it has less of an impact on key business functions than a sudden reduction of 10 or 20 percent of the workforce across the board.
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