Rightsizing entails laying off employees to maximize efficiency.
The term "rightsizing" refers to reducing employee numbers so that the workforce is the "right" size for the amount of work that needs to be completed. Many people interchange the words "downsizing" and "rightsizing," because both terms generally refer to reducing the cost of employees. Many people associate the term "downsizing" with companies who lay off employees because of economic difficulties, in contrast to the term "rightsizing," which refers to companies who reduce employees in order to maximize productivity.
Permanent Downsizing
Companies often rightsize by dismissing employees permanently. Sometimes companies let go a single employee whose job position does not add to the company productivity. Sometimes the company no longer needs a certain job function, as is the case of a company that computerizes human tasks, while other times, the company lets an employee go because that particular employee does not work up to par. Sometimes companies remove entire departments whose services are no longer necessary. For example, a company that switched from developing software to purchasing ready-made software may let go the entire software development team because it no longer needs this service.
Temporary Layoffs
Companies often lay off employees temporarily if they are going through a slow spell or unstable period such as new management or a company buyout. In these cases, companies suspect they may need the employees again in the future, but do not need or cannot afford their services at the moment. Using the temporary layoff strategy, businesses lay off employees with the intention of rehiring them if and when they need their services once again.
Part-Time Employment
Businesses who track employee productivity effectively often realize that some employees do not have enough work to fill up a full-time position. These companies switch employees from full-time to part-time employment since they cannot justify a full-time job. Small companies who do not have enough work to fill up a full-time position often use this strategy.
Contract Labor
If a company only needs a certain employee on a periodic basis, the company may choose to hire the employee as a contract laborer instead of a company employee. This method maximizes business efficiency, as the company only pays for work performed. While contract labor usually costs more per hour than full-time employees earn hourly, companies gain in the long run, because they do not have to pay employee benefits and only pay for exact hours needed.
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