Rightsizing and ethical challenges

 SHEENA MAE P. PALASPAS, MBA

Divine Word College of Laoag

(The content of the paper belongs to the author).  

Abstract

In today’s fast-changing business environment, the capacity to adapt and respond quickly is essential for surviving and sustaining development. Further to this, according to Daft and Marcic (2011), a big part of the success of every organization and business rests, at large, on managing human resources. By adopting various strategies for restructuring the workforce, each organization can possibly become flexible in allocating resources more efficiently to achieve the best possible economic results.

Although, many organizations try as much as possible to reorganize their workforce to address their dynamic business problems and cut-throat competition, however, not all strategies implemented by these organizations resulted in successful adoption. Oftentimes, if the selected strategy is not the right thing nor fitted to do, then, these acts of the management will only implicate issues on the organization’s corporate values which creates an ethical dilemma that needs to be taken care of.  

In this regard, this article would like to focus on further understanding rightsizing of the workforce as a justified business strategy, and its impacts, and present various ethical perspectives revolving around this management tool.

Keywords: rightsizing, restructuring, workforce, ethics

Introduction

As cited by Brillantes and Ruiz, (2022), since the 1930s during the administration of President Quezon up to President Duterte in 2017, streamlining efforts on the bureaucracy has been on the priority agenda of every administration in the Philippines. Various strategic terms such as “reengineering,” “reorganization,” “reinventing,” and “rationalizing” were initiated which aimed at improving financial management and delivery of public service but all these interventions turned out to be failed attempts

It has been noted that personnel services allocation continued to consume a large amount of the total budget fund of the government every year (Franco, 2005). Moreover, as cited by Pulse-Asia’s Survey on Filipinos’ Views on Fiscal Crisis, the number of personnel continued to grow but the delivery of services remained dismal and unsatisfactory due to the increased issues on red tape and corruption in various government sectors.

In this regard, it was expected that President Ferdinand Marcos Jr. during his First State of the Nation Address (SONA) will put emphasis on the need for reforming the government and other organizations through a rightsizing process. These prevalent issues triggered the administration to prioritize several rightsizing studies accompanied by legislative proposals for the bureaucracy.of 

Rightsizing of Workforce 

It can be inferred that rightsizing term is not new, it can be compared to be with the same aim as rationalization and other previous streamlining reforms. It can be recalled that it has been one of the priority areas of the Legislative-Executive Development Advisory Council (LEDAC) and the Duterte administration. As defined by Diokno-Sicat (2018), rightsizing is a reform which aims to create a leaner, efficient and effective government organization by reducing or, if possible, eliminating, overlaps, redundancies and duplications in existing agencies, rules and regulations, systems and processes.

 

This intervention has been noticeably supported and underscored by President Marcos Jr. By rightsizing the government, institutional capacity will be enhanced to perform its mandate and be able to provide better services to be delivered while ensuring that there is optimal use of resources. He also pointed out the need for fundamental management principles of efficiency, economy, and effectiveness when restructuring the workforce.

 

Aside from that, the company culture website defines rightsizing as the process of reshaping the workforce to improve business performance and profitability, regain profit, and reduce operational costs in order to address and manage the changing needs of an organization.

Furthermore, Anjali, (2021), defined rightsizing as a strategic tool to remain competitive. By optimizing a skilled, abled and knowledgeable workforce. She further added that it doesn’t necessarily mean laying off or decreasing the workforce rather, it also includes the recruitment and selection of fresh talents and the upgrading of existing roles and responsibilities of current employees.

Factors affecting the Rightsizing of the Workforce 

The changing market conditions, fluctuating customer needs and new internal goals may cause some companies to rethink and optimize their workforce, moreover, to establish if rightsizing is the right move for your business, it is essential to review your overarching goals and objectives. As cited by Sigue-Bisnar, (2020) in her article, each organization and business must assess various internal and external factors affecting rightsizing:

Internal Factors:

1.  Business Strategy. To maintain operating efficiency, many business resorts to the implementation of business expansion or contraction which can lead to rightsizing of the workforce.

2.  Conflict. Misunderstanding among stakeholders, managers and employees that can happen from mergers and acquisitions hampers productivity, growth and business reputation. Through rightsizing, the management can inspect and determine equal corrective measures to solve the issue.

3.  Declining Profitability. Firms resort to rightsizing when they notice that there is a continuous decline in productivity and an increase in operational costs.

4.  Multiskilled workers. Retaining employees who are multi-skilled are beneficial criteria for rightsizing. Retaining them, reduce the cost of hiring other people and reduces the duplication of positions. 

External Factors

1.  Automation and Technology. Technological advancements help in coping with different organizational business needs. Therefore, rightsizing is the key to determining the right size and right people to be retained in the company to fully optimize its resources.

2.  Economic Status.  Economic factors like interest rate, demand, supply, and all other related terms may generate the need for rightsizing.

3.  Political-Legal Aspect. Companies and organizations may be required to comply with rightsizing according to the political initiative reforms and relative changes in company law and labour laws. 

Aligning the workforce with the company’s strategic direction is critical, organizations and businesses need to be prepared to manage the shift in direction. To determine if the workforce has the right and enough skills, many companies should conduct an organizational audit to see if they have the best roles and people within their business. From there, they will also have to eliminate redundancies, and look into or adopt the emerging trends in the industry, so that, the business runs efficiently. It should be noted that when rightsizing is done strategically, then it is the right choice.

Benefits of Rightsizing the Workforce

According to Thangjam, (2022), the process of determining the benefits of rightsizing organizations and businesses can be distinctively seen from two perspectives:

Point of View of the Businesses or Organizations:

1.    Time Efficient. The process of Rightsizing involves less time in comparison to Downsizing.

2. Maintain Competitiveness. Continuous strategic choices in managing human resources according to the changing environment helped the company to remain competitive.
3. Attract Proficient Applicants. The profitability and growth achieved through rightsizing attract top talent to seek employment in the organization.
4. Increased Productivity and Revitalize Workforce. Rightsizing is the process of removing people from a company who aren't doing their job. It can either be because they don't have the skill set to do it effectively or are unwilling to put in the work. The restructuring of organizational structure results in an overall increment in productivity.
5. Better Hiring Decisions. Rightsizing is all about getting rid of the people who aren't a good fit for your company. It helps you simplify the decision process by questions like: Do we really need this person? Does this person possess the skills needed? Can we pay them?

Point of View of the Employees:

1.     Recognition. During the rightsizing process, some employees get credit for their efforts towards the organization.

2.     Self-Awareness. The employees become aware of their capabilities when management assigns more responsibilities to them.

3.     Commitment. Retained employees renew their commitment to work and organization.

4.     Creativity. Job rotation within the organization helps to increase the creativity of the individual.

5.     Replenished Energy. By removing unproductive employees and simultaneously finding more productive ones, it will fill new energy and uplift the morale of performing employees. The retained and new employees refill the organization with new ideas and energy

Challenges of Rightsizing the Workforce

According to Miller, (2022), the following are risks and challenges that may be faced when implementing rightsizing of the workforce:

1.    High Employee Turnover. Oftentimes, rightsizing can backfire and lead to high attrition among employees. A case cited in Better.com. In late 2021, the CEO of Better.com laid off 900 employees over a Zoom call. Several other remaining employees chose to voluntarily leave as a sign of protest and distrust. The downside of this restructuring is the risk of losing some of the high-performing employees, and they might choose to leave as a sign of protest.

2.    Impacted Business Image. Employees have a negative perception of a company that is going through the rightsizing process. It could prevent new employees from joining the organization and cause existing employees to leave.

3.    Possible Breach of Business Privacy. Every company has its own share of confidential information, without which it cannot function. Some resentful employees might opt to disclose confidential company information to their competitors. This might result in a high cost for the firm and a loss of data security

4.    Possible threat of Legal Suite. Some employees may even file a lawsuit against their employer in the worst of cases. If rightsizing is not effectively handled, it might make matters worse rather than better for the company.

5.    Effect on Client Relations. Because rightsizing can harm the company's image, it can jeopardize existing client relationships and can lead to confusion and miscommunication.

The trade-off between Deontological Aspect and Utilitarian Aspect

It cannot be denied that the mentioned definitions are very idealistic to the extent that it sheds us hope that by embracing this intervention will uplift our economic and social lives which were being disrupted by the recent pandemic. By being able to see the different impacts of rightsizing, positive and negative, we gain more understanding of it and when to really use it.

In addition to this realization, Perante-Calina (2018) suggested that the process of reorganization and rightsizing should go beyond the deontological aspect, where traditional duties on the economy, efficiency and effectiveness are always put into consideration, ignoring what is at stake will just create more implications. As commonly understood, “economy” is about determining the ideal means of achieving goals and objectives quickly and at the lowest possible cost. “Efficiency” is competently finishing tasks (programs, projects, activities) with the least time and effort. “Effectiveness” is accomplishing an organization’s goals following sound processes anchored on its overall mission, with the pertinent national and local authorities capably providing public goods.

Over the years, based on studies and interactions with many academics and practitioners in public administration at the local, national, and global levels, we have concluded that it is equally important — and relevant — to include the principles of equity, ethics, and accountability in any reform intervention. Which more embraces the utilitarian approach as we need to put consideration on the possible consequences of our actions.

In this regard, “Equity” has two dimensions: one is a preference for the poor and the vulnerable, and the other is an effort to reform governance and administration. On the other hand, “Ethics” means knowing what is right from wrong. In public service, as provided for in the Code of Ethics and Accountability (RA 6713), civil servants are expected to fulfil their duties with responsibility, righteousness, honesty, and impartiality as much as possible. Finally, “accountability” is about an obligation or willingness to accept responsibility — and when called for, the consequences — for such actions.

There should be a trade-off between the intentions of delivering duties and responsibilities with giving due care diligence to the consequences it may bring. It is true that the President and administrators and managers of different organizations and businesses have the authority and the widest latitude of discretion of power to hire and remove employees. However, such power is not absolute, it must be exercised within the bounds of civil service and labour laws and regulations and should be in consideration of his ethical accountability.

Conclusion

Strategic rightsizing is a useful tool in boom times but is necessary in challenging times. Rightsizing also enables businesses to plan and meet their strategic objectives more effectively.  Moreover, rightsizing efforts are not only considering the present problems and issues but should also consider the long-term effects of such interventions. Furthermore, rightsizing efforts should not only have long-term perspectives but also it should be sustainable (Naval, 2022).

Needless to say, graft and corruption continue to be among the biggest and longest-running challenges confronting the Philippines. Despite the many reorganization interventions of all administrations, corruption remains a reality that exists even in the smallest income-earning business.

With these, there is a need to take a more planned approach that stays true to the company’s intent and minimizing any impact on quality and customers could well be the differentiator that better prepares your organization for the next normal. Moreover, ethics and accountability MUST be always EMBEDDED in designing and implementing reforms and rightsizing strategies.

References:

Anjali, J. (2021). Rightsizing. https://theinvestorsbook.com/rightsizing.html#Conclusion

Brillantes, A. and Ruiz, K. (2022). Principles in Government Rightsizing: 5 Es and an A. https://www.bworldonline.com/opinion/2022/08/02/465530/principles-in-government-rightsizing-5-es-and-an-a/

Daft, R. and Marcic, D. (2011). Management: The New Workplace, 7th Edition. South-Western Cengage Learning

Diokno-Sicat, C.J. (2018). Economic Principles for Rightsizing Government. https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps1846.pdf

Miller, T. (2022). What is rightsizing? Definition and meaning. https://marketbusinessnews.com/financial-glossary/rightsizing-meaning-definition/

Naval, G. (2022). State workers: Rightsizing must start from the top. https://malaya.com.ph/news_news/state-workers-rightsizing-must-start-from-the-top/

Pulse Asia’s October-November 2004 Ulat ng Bayan National Survey on Filipinos’Views on the Fiscal Crisis. Retrieved from: http://pulseasia.newsmaker.ph

Sigue-Bisnar, M. (2020). Rightsizing done right. https://www.grantthornton.com.ph/insights/articles-and-updates1/from-where-we-sit/rightsizing-done-right/

Thangjam, T. (2022). Understanding Rightsizing in HRM in the Right Way. https://blog.vantagecircle.com/rightsizing/