Rightsizing your business — the right way

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Tradie HR director Leigh Olsen

Tradie HR director Leigh Olsen says Covid-19 has forced business owners to take some heart-wrenching decisions. Here’s how to go about rightsizing your business the right way.

The Covid-19 pandemic has created a level of pressure on employers and employees like never seen before. Business owners are having to consider decisions that threaten what they have spent years pouring their heart and soul into.

Workers are suddenly finding themselves out of work, competing for jobs with many others, or considering a career change altogether. And emotions are running at an all-time high.

Doing nothing is not an option for the majority of SMEs, with rightsizing a key step in helping any business to get through these turbulent times.

Often referred to as “restructuring”, rightsizing is the process of a business restructuring or re-organising itself by either reducing staff numbers, cost cutting or rearranging its workforce to adapt to market conditions.

It is a stressful business activity with not only legal requirements, but also an obligation to do right by all parties.

This article clarifies what you can do to make sure you “do right by all parties”, and take care of all of those involved. Plus you will gain guidance around the risks and responsibilities if you have to rightsize your business.

What are your legal requirements?

Redundancy should always be a last resort, and should only be considered when you have tried everything else and there is no other choice but to let staff go. Section 103A of the Employment Relations Act 2000 states “what a fair and reasonable employer could have done in all the circumstances”.

This means it is important, as part of getting the process right, that employers consider other alternatives to rightsizing than just going straight to redundancy. Other options could be:

Use of secondments.

Extended leave without pay (LWOP).

Reduced days/hours of work.

Voluntary exit.

Redeployment.

Contractor arrangement.

Allow reasonable time for consultation and feedback

No one wants this process dragging on for several weeks or even months because it’s too hard, emotionally and financially.

However, legally, employees must be given time to think about the changes you are considering. Until you have their comments and feedback, you must not make a firm decision about any restructure, and should remain open-minded until the end of the consultation process.

Employees are legally entitled to be consulted about things that could significantly affect their jobs. Until you have their formal comments on the change you are thinking about, your plan is not final — it is a proposal.

Employees do not need to agree with your proposal for restructure, but they do need to have a say.

What should you consider before rightsizing?

The word “restructure” can often strike fear into the hearts of many — from those potentially affected through to those having to conduct the process.

Whatever the situation, a carefully considered and thoughtful response is the best approach for this often emotional change management process. Use the following key aspects to reduce apprehension and distress for all those involved.

Take the time to plan: Start by considering how the change will impact your customers, clients and, most importantly, your workforce.

Use this information to develop a robust change proposal that clearly indicates your reasons for the change, and be prepared to provide specifics. If you are claiming that you are having to do a restructure for financial reasons, then provide data to support that claim.

 Develop a communication strategy: Once you have decided on the business rationale for the change, how are you going to communicate it? Who is going to do this and when? Will this be done in a group meeting or on a one-to-one basis?

For those potentially affected employees, leaders must clearly explain the impacts for them.

If appropriate, other employees can be kept up to date with proposed changes — but always keep your priority to those directly affected with the restructure.  

Timing is also an important consideration. You don’t want this process to become drawn out, but nor should a restructure be quick and dirty.

Employment New Zealand has a detailed Overview of Workplace Change Document available that outlines the steps to follow when making such a change in the workplace — https://www.employment.govt.nz.

Be Truthful: Be prepared to tell the truth, the whole truth and nothing but the truth for the change.

Everything you say and do, including emails and texts to each other, could become evidence if an employee wants to take a personal grievance against you for an unfair process, or that you made them redundant for the wrong reasons.

Being open and transparent goes a long way in assisting staff to better understand where the company is coming from.

Show Leadership: From experience, a key aspect that can help this whole process is great leadership. Be patient with your employees, and make yourself available to answer questions and talk them through the process.

Be ready for emotion and, if needed, provide support, whether it be through external counsellors or an internal resource. Sometimes just being silent and listening to them is a key part for the process to work.

Support

At Tradie HR we know this whole restructuring process can be scary, intimidating and emotional. We are currently offering 20 minutes of free HR advice for any Registered Master Builder members who would like to sense-check their current process, or just chat in confidence about rightsizing their business.

Note: This article is not intended to be a replacement for legal advice.