Workforce Reductions

The process of reducing the workforce is not the opposite of the process of enlarging it. While adding to the workforce is generally well received and signifies good times, reducing the workforce involves some pain and a period of economic constraint.

Although the importance of position management becomes more intense during workforce reduction, the philosophy and many of the tools are different. The reasons for curbing, cutting, or eliminating a part of the workforce can be pragmatic, strategic, or both. They include budget shortfalls, program sunsets, retrenchments affected by ideological beliefs, and technological advancements that make employees redundant. The most common reason for reducing personnel is budget woes, typically aligned with recessions.

The tools that legislators and executives use in reducing the workforce can be more or less severe. Less severe curbs include personnel ceilings, hiring freezes, and buyouts; these approaches put caps on the size of the workforce or reduce it modestly. Such tools are all being used extensively in the public arena across the world today.

Personnel ceilings set the maximum number of positions that may be budgeted by appropriation unit or for all positions in an organization. A related method is the hiring freeze, in which an employer stops hiring for all nonessential positions; a hiring freeze uses the natural attrition caused by retirement and resignations to reduce the workforce.

Buyouts can be a more strategic approach to workforce reduction, resulting in lower employee stress levels as colleagues leave in better spirits. The tools used to reduce the workforce more substantially include layoffs, reductions in job costs, and reorganizations.

Privatization occurs when public responsibilities for services or assets are directly or indirectly shifted to the private sector. There are many methods and types of privatization.