Adapting to shifting marketing demands is essential to the survival and success of your business, and rightsizing offers a strategic solution. A 2021 McKinsey Global Survey found that 93% of executives reported significant restructuring efforts underway or on the horizon, underscoring the urgent need for a structured approach to operational changes.  

What is rightsizing?

But what is rightsizing? It’s the process of restructuring an organization to align its operations, workforce and resources with current and future business objectives. A comprehensive approach to optimizing your business for maximum efficiency and effectiveness, rightsizing is not just about cutting costs. 

This article aims to demystify the concept of rightsizing, explain how it differs from downsizing and explore why it matters to businesses of all sizes. Whether you’re a small enterprise looking to scale or a medium-sized company aiming to streamline operations, understanding rightsizing can help your business reach new levels of success. 

Rightsizing vs downsizing

While often confused, rightsizing and downsizing are distinct approaches to organizational restructuring. Rightsizing is a strategic process that optimizes the entire organization, potentially involving both reductions and expansions in different areas. Downsizing, on the other hand, typically focuses on reducing the workforce to cut costs. While downsizing is often reactive, rightsizing is generally proactive and aims at long-term efficiency. The choice between these approaches depends on your organization’s specific goals and circumstances.

Eights reasons businesses implement rightsizing

Businesses implement rightsizing for a variety of reasons, all aimed at creating a more efficient, productive and competitive organization.  

1. Cost reduction 

Rightsizing helps businesses identify and eliminate unnecessary expenses without compromising productivity. This might involve streamlining processes, reducing redundancies or reallocating resources to more profitable areas. However, it’s important to note that unlike downsizing, cost reduction in rightsizing is not the end goal, but rather a means to create a more effective organization. 

2. Improved efficiency and productivity 

By aligning resources with business goals, companies can see substantial improvements in operational efficiency. This often results in higher productivity levels as employees are better positioned to focus on core tasks and strategic priorities. For instance, a software company might use rightsizing to reduce its in-house IT support team, while investing in more developers and project managers to accelerate product development. 

3. Employee morale 

Contrary to what you might expect, when done correctly, rightsizing can actually improve employee morale. By creating a more sustainable work environment and clearly defining roles and responsibilities, employees often feel more valued and engaged. This is particularly true when rightsizing involves not just cuts, but also investments in employee development and new opportunities for growth within the organization. 

4. Optimized resource allocation 

This process allows businesses to ensure that their resources – human, financial and material – are being used in the most effective way possible. This can lead to better returns on investment across the board. For example, a retail chain might handle rightsizing by closing underperforming stores and redirecting those resources to enhance its e-commerce capabilities, aligning with changing consumer shopping habits. 

5. Adaptation to market changes 

In today’s fast-paced business environment, the ability to quickly adapt to market changes is crucial. Rightsizing provides the flexibility needed to respond swiftly to changing customer demands or competitive pressures. It allows companies to pivot more easily, entering new markets or launching new products with the right resources in place. 

6. Technological advancements 

As technology continues to evolve at a rapid pace, businesses must keep up or risk being left behind. Rightsizing can help companies integrate new technologies more effectively, often leading to improved processes and capabilities. This might involve reducing staff in areas where tasks can be automated while hiring for new roles that require specialized technological skills. 

7. Enhanced competitiveness 

Enhanced competitiveness is often a natural outcome of successful rightsizing. A rightsized organization is typically more agile and responsive, allowing it to outmaneuver competitors and capitalize on new opportunities more quickly. This agility can be a significant advantage in today’s fast-moving business landscape. 

8. Improved financial health 

Finally, by optimizing operations and resource allocation, rightsizing often leads to improved financial health. This includes not just cost savings, but also potential revenue growth as the company becomes better positioned to pursue new opportunities and respond to market demands. 

Potential challenges and how to overcome them

While rightsizing can offer numerous benefits, it’s not without its challenges.  

Employee morale and retention 

If not handled well, rightsizing can create uncertainty and anxiety among employees, potentially leading to decreased morale and increased turnover. The process must be handled with transparency and empathy, and communication is key.  

To mitigate potential issues, business leaders should: 

• Communicate openly – Explain the reasons for rightsizing, the expected outcomes and how it will benefit the company and its employees in the long run 
• Provide support and resources – Whether through outplacement services, retraining opportunities or assistance in finding new roles within the organization, affected employees should receive support. 
• Involve employees in the process – Doing so, where possible, can also help give employees a sense of control and ownership. This might involve soliciting ideas for improving efficiency or asking for input on new roles or responsibilities. When employees feel that their voices are heard and valued, they’re more likely to support the rightsizing efforts and remain engaged with the company. 

Operational disruptions 

Changes in structure and processes can lead to temporary disruptions in operations, which can impact productivity and customer service. To minimize these disruptions, it’s important to plan the implementation carefully, considering all potential impacts. This might involve implementing changes in phases to allow for adjustments and providing thorough training and support for new processes or roles. 

Public perception 

The process can sometimes be perceived negatively by the public or stakeholders, particularly if it involves layoffs. It’s important to manage this to maintain public trust. The following are some suggestions: 

• Clearly communicate the strategic reasons for rightsizing, emphasizing the long-term benefits for the company, employees and customers. 
• Demonstrate a commitment to ethical practices throughout the process. 
• Maintain quality and customer service – Carefully assess the impact of changes on key business functions and maintain open lines of communication with customers throughout the process. Monitoring key performance indicators closely during and after the rightsizing can help ensure that quality and service levels are maintained or even improved. 

It’s important to remember that rightsizing is not a one-time event, but an ongoing process. The business landscape is constantly changing, and what’s “right” for your company today may not be right tomorrow. Regular assessments and adjustments may be necessary to ensure your organization remains optimally sized and structured for success. 

Five steps to rightsizing in your organization

Implementing a rightsizing strategy requires careful planning and execution.  

Step 1: Clearly define your business objectives. 

What are you trying to achieve through rightsizing? Is it to improve profitability, enter new markets, adapt to technological changes or some combination of these? Having clear goals will guide your rightsizing efforts and help you measure their success. 

Step 2: Conduct a thorough analysis of your current organization.  

This includes not just financial and operational data, but also an assessment of your workforce skills, your technological capabilities and your organizational culture. Understanding where you are now is crucial to determining where you need to go. Types of rightsizing analyses include:

• Ratio analysis: This is a common approach that involves comparing financial and operational ratios to industry benchmarks or the company’s historical performance.
• Activity analysis: This approach examines the time and resources dedicated to various activities within the organization. It helps identify non-value-adding activities and opportunities for process improvement.
• Driver analysis: This focuses on understanding the key drivers of business performance and aligning resources accordingly. This can help prioritize areas for rightsizing efforts.
• Mathematical modelling: For more complex organizations, mathematical modeling might be used to simulate different organizational structures and predict their impacts on performance and efficiency.

Regardless of the specific analytical methods used, it’s important to approach rightsizing with a comprehensive, data-driven strategy. This helps ensure that decisions are based on objective information rather than gut feelings or assumptions. 

Step 3: Develop a comprehensive rightsizing plan. 

Based on your analysis and defined objectives, your plan should include specific actions to be taken, timelines and expected outcomes. It’s important to consider both short-term actions and long-term strategies. For example, you might plan immediate cost-saving measures alongside longer-term investments in new technologies or employee skills development. 

Step 4: Implement your plan. 

Throughout the implementation process, maintain open and frequent communication with all stakeholders. This includes not just employees, but also customers, suppliers and investors. Be prepared to address concerns and questions honestly and transparently. 

Step 5: Monitor your progress and make changes as needed. 

Monitor the progress of your rightsizing efforts closely, using predetermined metrics to assess their effectiveness. Be prepared to adjust as needed – rightsizing is often an iterative process, and flexibility is key to its success. Don’t overlook the importance of change management in the rightsizing process. Provide further training and support to help employees adapt to new roles or ways of working. Celebrate successes along the way to maintain momentum and boost morale. 

How can BPM help with rightsizing?

Rightsizing, when done correctly, can provide your business with the agility and focus needed to thrive in uncertain times. However, navigating the complexities of rightsizing can be challenging, especially for small to medium-sized enterprises. This is where professional guidance becomes invaluable.  

BPM offers comprehensive Accounting and Advisory Services that can help you develop and implement effective rightsizing strategies tailored to your unique business needs. Our HR Services team can assist you in conducting thorough analyses, developing strategic plans and implementing changes in a way that minimizes disruption and maximizes benefits. We understand the financial and operational intricacies of rightsizing and can help you make informed decisions every step of the way. 

At BPM, we believe that rightsizing is not just about cutting costs – it’s about positioning your business for long-term success. We can help you identify opportunities for growth and innovation within the rightsizing process, helping your organization emerge stronger and more competitive.  

To find out more about how BPM can help you approach rightsizing with confidence, contact us.