What is Reduction in Force & Why It''s Important

Duration: 6-7 minutes

Reduction in force refers to the permanent reduction in a company''s workforce through layoffs and termination of employees. The downsizing is done for budgetary reasons or to conserve expenses for the company.

In this Article

• Why Reduction in Force
• What is the difference between ""Reduction in Force"" and ""Layoffs""
• How should organisations communicate Reduction in Force
• What to expect after Reduction in Force?
• FAQs

Why Reduction in Force?

The company or the employers turn to Reduction in Force when there are fewer needs or absolutely no need for the products and services provided by the company.

A very prevalent concept during and post Covid was a reduction in force because the need for services and products diminished after the pandemic. For example, downsizing was primarily observed in the travel industry, retail and manufacturing sector, and small businesses.

Some of the major reasons noticed are as follows:

• Digital Transformation of Workforce
• Rise of Technology
• Artificial Intelligence

What is the Difference Between ""Reduction in Force"" and ""Layoffs""?

Reduction in force and lay off are the two terms that are used when companies are brought to the stage of cutting down employees and their cost.

According to SHRM,

""These are all types of cost-saving employment actions that are commonly misunderstood because the words are often used interchangeably when their meanings are actually different.""

Reduction in Force

Reduction in Force is a well thought-out, laid strategy to eliminate employment with no prospect for future rehiring. The reasons could be:

• Technology: The advancing technology and the rise of Artificial Intelligence have already put lots of jobs at risk, making it quite a relevant factor in Reduction in Force.
• Issues in the Budget: The company may opt to cut down employees either to save on money or to prevent bankruptcy.
• Lack of Need of Service: Reduction in Force can also be due to lack of need for a service provided by the company or the deteriorating need of the service amongst the targeted people.
• Decision to Shut Down a Particular Department: A company may permanently close one of its departments because the department is no longer needed or its services are no longer useful.

Layoff

Layoff is a similar, though quite a different process of saving money. It may be ill-planned, but it is immediate: a company may take off its employees just for the time being and re-hire them in the future. Some of the reasons behind layoffs are:

• Lack of Funds: A company, or an organization may not have enough supportable funds for many employees; in such situations the employers lay off a few employees. Though, if the situation changes, they may fill the vacant position.
• Save Money: At times, an employer may lay off their employees for the time being to save some money on salaries and benefits.
• Fewer Needs: The services needed could actually be much lesser. Like in a 5-member department, if a person is laid-off, it does not change the department in any big way. Nor does it impact the quality of work.

How Should Organizations Communicate Reduction in Force?

Communication of a sensitive message, such as Reduction in Force, is a delicate task for a company because this will disrupt the negative life of all employees in the company, no matter whose job has been affected or not.

The companies could soften the blow in a way that they would be straightforward about the situation regarding their employees but could be confidential about the matter. In addition to this, the companies should make advanced provisions for the provision of outplacement service in terms of career counseling of the employees affected by the situation.

What Employees Could Expect After Reduction in Force?

Involuntary separation during a Reduction in Force is frustrating and can be emotionally draining. It''s quite normal for an individual to feel annoyed, uptight, and nervous for the unknown future.

While a sudden announcement of a Reduction in Force does throw one''s long-term goals out of gear, it also gives one a chance to explore new horizons, a new career path, and the development of a new skill set. It can also be seen as one''s personal relaunch time.

Given below are a few steps one should follow to step back into the job market:

• Review Your Alternatives: After falling prey to Reduction in Force, you can reflect on your financial situation and consider taking a break. You are in a position to begin searching for a new role that aligns with you.
• Update Your Résumé: Updating your resume and your LinkedIn profile might help get a headhunter''s interest. Even adding a few more skills to your resume might help in a new job search.
• Explore and Consider Your Options: You can begin your job hunt all over again. Such jobs may be in sync with the profession you are in or may even lead you to consider a profession change for that matter.
• Develop New Skills: You can take a short break and use the same time to get better at some skills which are adding value into your life as well as at your work. Development of new skills can add value to your resume and thus present it as a better employment opportunity.

Conclusion

Reduction in force is a strategic procedure for permanently reducing the workforce of a corporation. Reduction in force is certainly a more permanent saving solution as opposed to layoffs. The latter are temporary.

Layoff is a sudden action to save organization money and the employees can be hired back unlike reduction in force. Employees can overcome the reduction in force by enhancing their skills and updating the resume.