The Dangers of Downsizing Without Considering Quality of Hire

It seems like you everywhere you turn you can’t escape hearing the unfortunate news of another company layoff. Recently Meta laid off 13% of its staff, equating to11,000 workers. 

Whether it’s downsizing, layoffs, reduction in force, or workforce optimization - these are all terms used when a company has more workers than they need or can afford.

Before people are let go, however, there are important questions that need to be addressed:

• Who will be let go and why?
• How can companies downsize without ruining relationships with their former workers?
• How can morale be maintained among the remaining staff?
• How can unwanted employee churn be avoided? 

Answering these questions before employees learn of intended layoffs is critical. Plans for downsizing or force reduction should always be planned down to the last detail, to avoid losing top talent and destroying the public perception of the organization.

The Pitfalls of Last-In, First-Out Layoff Practices

Outdated last-in, first-out methods lead to disastrous downsizing decisions for Quality of Hire.

Recent research from Crosschq Data Labs discovered, after running a scenario using Crosschq Analytics that using “Last-in, First-out” methods for downsizing, companies could (and did) lose some of their top performers.

Obviously, tenure can’t be trusted as the main indicator of Quality of Hire. In this case, it was revealed that:

• Employees that were let go could have had an average performance rating of up to 8.1
• Employees retained could have had an average performance rating as low as 7.3

Because performance data wasn’t used in the decision-making surrounding the layoffs, and tenure was used solely as the deciding factor, the Quality of Hire of employees terminated was 15% higher than those retained.

Using the wrong methods or metrics to determine who to let go can result in the exit of key performers from an organization. It’s time to let go of the idea that tenure is the all-important factor in deciding an employee's value to an organization. 

Why Tenure Bias Is Dangerous

Because of tenure bias when selecting employees to dismiss, companies can (and do) lose some of their top potential performers. Bad termination and retention decisions can directly affect remaining workers, and negatively impact the likelihood of producing the business outcomes desired. 

Loss of knowledge

Using the wrong methods or metrics to determine who to let go can result in the exit of key performers from an organization, and with them goes the accumulated knowledge they have built during their time in the company, even if that time was short.

Reduced productivity

A whopping 60% of the cost of turnover is lost productivity. Productivity reduces by around 30% across employees forced to cover work not being done by a departed employee. With so many employees overworked and under-rewarded, sick calls go up, leading to even more losses in productivity.

Damaged morale

When employees see high-value employees let go simply because they haven't been around that long, their worries over their own jobs and outrage on behalf of their high-performing ex-coworkers can spill out in the form of discontent and demotivation. 

Increased voluntary turnover

A recent study shows that just a 1% force reduction due to a layoff can cause a 31% decrease in workforce due to voluntary turnover. This can include high-value employees whose loss can seriously damage business outcomes.

Combating the Risks of Workforce Reduction

Employers can minimize the adverse effects of layoffs by following a clear, data-driven strategy for maintaining productivity, retaining key employees, and keeping up a good relationship with workers who are being terminated.

Leverage Quality of Hire data to make objective layoff decisions

Businesses simply can’t afford to make subjective decisions when it comes to a reduction in force: instead, Quality of Hire should always be the deciding factor. This will help maintain productivity levels and deliver positive business outcomes.

Using post-hire Quality of Hire data via Crosschq Analytics to review performance history, track engagement metrics, and assess culture add before downsizing can prevent the loss of employees who have historically contributed the most to organizational performance.

Provide resources for employees being terminated so they land softly

Making sure employees who are being terminated have somewhere to go can go a long way toward building company loyalty and trust. In one study, companies that provided outplacement support for laid-off employees received 43% better employee opinion ratings than ones that did not.

Crosschq Assist offers downsized employees the opportunity to opt directly into Crosschq’s sourcing database, a talent pool preferred by many employers. This connects them with recruiters for more than 1,500 hiring organizations, providing them with a potential fast-track path to a new position.

Take the opportunity to optimize the workforce

Some employees may choose to leave even when the organization would benefit more from their staying. Other employees will exit and their loss won’t be so keenly felt - except that now there may be more empty seats than is sustainable.

This is the ideal time to optimize the workforce. Identify current and potential future skills gaps within the company, and figure out if empty roles can be consolidated for greater efficiency. Redefine job responsibilities and create new roles if needed to meet anticipated needs.

Then use a talent pool like Crosschq Recruit to quickly find candidates who have strong Quality of Hire potential, and fill those empty seats with employees that don’t just help the company meet business expectations, but provide the foundation for a future-proofed workforce. 

Learn how to measure and predict Quality of Hire

Downsizing also provides the ideal opportunity to reimagine your company’s workforce as a Quality of Hire powerhouse. Crosschq has developed a Quality of Hire scorecard to help organizations analyze outgoing and incoming employees' performance and assign Quality of Hire scores.

This data can be used to build profiles of ideal employees, which can then be leveraged in future recruitment efforts when the company is ready to expand again. By investing in Quality of Hire as a key metric affecting business outcomes, organizations raise the bar for productivity and revenue building.

To learn more about how Crosschq can identify employees in the workforce with the highest Quality of Hire scores, contact us for a demonstration today.