How to Avoid Costly Downsizing Mistakes
- clairesnow1
- Jun 9
- 7 min read
In the 12 months to February 2025, 261,223 potential redundancies were reported to the Insolvency Service*. This means you are not alone if your organisation is considering downsizing or restructuring.
No one likes to be in this position, it is stressful and emotional for both the managers managing the process and the employees who are having the changes imposed.
To some, it comes as a shock, whilst others may be excited about the opportunity to leave with a redundancy payment in their pocket.
In each situation, the process is still uncomfortable and can be difficult to manage well.
Having been involved in project managing restructures, I thought I would share three common mistakes that businesses make when managing these challenging situations and some ideas on how to do it differently.
Mistake 1 – Failing to Communicate (Enough)
I’ve seen the impact of a lack of communication on many occasions with large-scale change. In a small to medium sized business, it can be easy to make assumptions that people know what is happening as you all talk regularly, but this isn’t always the case. When downsizing, open, honest and timely communication is key.
Initial Communications
It can be tempting to keep your business problems quiet until you unveil the need to make redundancies. However, by talking about the business issues and requirement to cut costs early and more importantly, why you need to, you can ask the employees to get involved in finding solutions.
If they understand the difficulty and the consequences of not changing, you’ll be amazed at the simple cost and time-saving ideas they come up with that you haven’t even considered. Through exploring how to do things differently, you may also find skills in the team you didn’t even know existed. All you need to do is ask and listen!
Communicating the outcome of the ideas implemented and their impact on cost / time savings is often missed, but is vital. Openly sharing these updates not only shows you’ve listened and implemented the ideas, but also helps your employees understand if the situation isn't improving enough to avoid further measures.
Once you have carried out this activity, if there is still a requirement to cut head count, the employees will know that you have already tried to safeguard their jobs. It shows you care and are trying your best in challenging circumstances.
Announcing Redundancies
If you still have to announce possible redundancies at this point, whilst still a shock, it will not be totally unexpected.
Depending on how many people you are making redundant, there are certain legal requirements you need to follow on consultation and timelines. If you are unsure about this it is best to consult a HR or Legal professional, who can help you navigate the legalities.
The key is a meaningful consultation and exploring alternatives. No one wants to lose their job or see their colleague lose theirs. The team may consider what you think are radical suggestions to safeguard each other.
For example, if you believe your dip in sales may be temporary e.g. a 6 or 12-month recovery, then the team may consider a temporary reduction in hours across everyone rather than losing someone. Or there may be people in the team who have been desperate to go part-time, but didn’t think you’d be able to accommodate their request. Again, it’s about asking, listening and exploring the options.
Managing the Leaving Process
If the redundant employees' exit isn’t managed sensitively and the remaining employees don’t have the opportunity to say goodbye, it creates an ongoing problem with engagement and trust. The remainers may feel like the organisation doesn’t care about long-serving, loyal employees.
You may think that those remaining will be grateful for having a job, but if they feel like the situation hasn’t been managed well, they will vote with their feet, even if they have a job in your new structure. This then gives you a recruitment and skills shortage dilemma.
Redundancies can be awkward to negotiate, but remember you are dealing with people. I know people who have left due to redundancy with no leaving gift or meal out with their colleagues. If this were you and you’d given 15 years of loyal service, how would you feel? Whilst not everyone will want to have a leaving do, openly discussing how the employee would like their exit to be handled helps them feel more in control. Which leads nicely to the second mistake.
Mistake 2 – Under Estimating the Emotional Impact
For most employees, their job is who they are; it’s the first thing they tell people when they introduce themselves. You have no idea how someone really feels about their role. Some may see redundancy as an opportunity to do something different and embrace it. For others, their job may be the only part of their life that is good right now, and the prospect of it being taken away has a huge emotional impact.
Those directly impacted often take it personally, and it can knock their confidence. This is something they are going to need in order to apply for new roles and successfully sell their great skills to a new employer. A good consultation process and open communications with their manager will help the employee understand it isn’t a reflection on their expertise, it’s a business decision, not a personal one.
The whole team (even those potentially not affected) will be going through the change curve, and a whole range of emotions will come out, until they are ready to accept and move on. Depending on the circumstances, some may not even get to the point of acceptance prior to exiting, which can be tricky.
Open communication about what the change curve is or a similar model, and the range of emotions the team are likely to feel is really helpful. Taking regular checks of where the team is on the curve and giving them the opportunity to discuss it will support them in navigating the different stages. This can be particularly important if the consultation takes time.
You train your managers on the legal process for managing redundancies, but how to manage the emotional impact is often overlooked. That's why we created our training for Managers and Employee Representatives that includes support from a Mental Health First Aid trainer.
If you have an employee assistance programme, which provides support and counselling, ensure that your team knows how to access it and that it is free and confidential. If you have mental health first aiders in your team who aren’t impacted by the change, brief them to let them know what is happening so they can support too.
If your organisation doesn’t have these, find some useful support organisations or phone numbers that can be provided if required. For example, the National Debt Helpline, ACAS or local mental health support.
Be prepared to deal with the emotions well after the conclusion of the consultation process, your remaining team may still need time to process what has happened before they can move on with positivity.
Mistake 3 – Not providing support to exiting employees
Part of the redundancy process is allowing the exiting employees reasonable time off to search for a new job. It can be tempting if you are trying to carry out an effective handover to forget this.
If the exiting employee has to fight for time off to attend an interview and get a new role, it makes an already stressful situation even worse. They will leave feeling negatively about your organisation. If you make it easy to search for a new role, support them in writing their CV and interview preparation, they will feel very different.
A long-serving employee won’t have had to use their CV in earnest for a while. Entering a job market that has changed significantly, with the use of technology like applicant tracking systems, will be daunting.
With the prospect of time out of work, which may never have happened, your employee is likely to be nervous. Supporting them to create a good CV and prepare effectively for interviews will help build their confidence. It doesn’t have to involve a large outplacement organisation or cost a lot of money.
You can find cost-effective alternatives or even 1-2-1 support, see our outplacement services page for more information.
Effectively supporting your exiting employees may have a cost attached to it, but the cost of doing nothing is high:
Disgruntled ex-employees are likely to tell lots of people about their poor experience.
People have the right to appeal against your redundancy decision and could submit a Tribunal claim. By having a supportive process, you’re showing that you have been reasonable.
A breach of trust and confidence with the remaining employees is also costly – they may no longer feel inclined to go the extra mile or may start to look for work elsewhere, as they don’t want to be next in the firing line.
Poorly managing the redundancy process may also result in an increase in stress, absence and a dip in performance.
The above can seriously damage your brand image, unhappy employees talk to a lot of people. If your local community have heard the horror stories of how your redundant employees were treated, you will find future recruitment hard.
Spending a small amount now, can save you future time, effort and agency costs, which would soon exceed the cost of having an employee's CV reviewed or delivering a couple of half-day workshops on writing great CVs, planning your job search and preparing for interviews.
Things to Remember:
When downsizing, always remember both the employees who are going through the process and those employees who are going to be left when the process is over. They have different needs, and you will need to manage each group carefully and with empathy to successfully navigate this challenging time for you and your business.
It’s also important that you don’t forget yourself during this process too, Redundancy is never a nice process to manage. You’ve worked with the exiting employees closely, if you are a Senior Manager or Business Owner there is the added pressure of turning your business round. It’s vital to make sure that you have someone you can get advice and guidance from or just have a chat with if needed.
If you don’t have a HR team, this is one of the times having expert support can make a real impact in reducing the stress of the situation. It will also provide you peace of mind and safeguard you from any legislation challenges.
If you are about to embark on a restructure that may involve redundancies and you want to explore our project management or outplacement services, get in touch today.