In a world of global digital transformation and constant changes in the market, companies are increasingly faced with the need to optimize resources, adapt to new conditions and introduce more flexible approaches to organize work.
Digital projects have become an important part of the modern business environment, and managing them in a downsizing environment requires deep understanding, clear plans and precise execution. In the article you will learn what downsizing means, what strategies there are and what downsizing is in trading.
Downsizing – how virtual project management works
Author: Vladislav Afonin
What is downsizing and why is it needed?
This is a reduction in staff or a reduction in company expenses. It is usually used when there is a need to reduce costs, increase efficiency, or change the direction of a business. It is a measure that companies take to adapt to economic changes or reduce costs.
In the last decade, downsizing has become especially relevant due to the emergence of many factors that have influenced business. Amid economic change, technological shifts and the COVID-19 pandemic, businesses are forced to find new ways to cut costs and maintain productivity.
Why downsizing is needed:
- Cost reductions. By reducing staff, the company reduces costs for salaries and office maintenance.
- Process optimization. Downsizing helps you focus on your main tasks and remove ineffective processes.
- Adaptation to new conditions. In difficult periods, cutting helps to survive and stay in the market.
It is important to downsize carefully to maintain a motivated team and avoid losing key employees.
What are the different downsizing strategies?
There are several of them, and companies use them depending on their goals and situation. To understand what downsizing means, it is important to consider its main types.
Basic downsizing strategies:
- Staff reduction. This is the most common method in which a company reduces the number of employees. For example, in the event of a drop in sales or a crisis, a company may cut departments that bring less value. The main thing here is to wisely choose which positions to cut so as not to lose key competencies.
- Outsourcing. Often, a company outsources some functions to third-party contractors to reduce staffing costs. For example, accounting or IT support can be transferred to specialized agencies. This helps the company save on salaries, equipment and other expenses.
- Process optimization. In this case, the company reviews work processes to identify and eliminate ineffective operations. For example, you can automate routine tasks or remove duplicate functions. This allows you to reduce not people, but costs, leaving only the necessary processes.
- Closing unprofitable divisions. If a certain area does not generate income, the company can completely stop its activities. For example, if a store in a certain region is not profitable, it may be closed to focus on more successful outlets.
Sometimes companies combine several strategies, such as downsizing and outsourcing, to minimize costs. The choice of strategy depends on the objectives and the current situation.
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Let’s also consider what downsizing looks like in trading. In trading, downsizing can take different forms aimed at optimizing operations and reducing costs.
Examples of downsizing in trading:
- Stores may reduce the number of employees, especially in low-volume positions. This reduces salary costs, but requires competent distribution of remaining responsibilities.
- Retail chains can remove goods that are not in demand from shelves, leaving only popular items. This helps reduce storage and purchasing costs.
- For example, some processes, such as cleaning or logistics, can be outsourced, which reduces the cost of maintaining staff and equipment.
These measures help trading companies cope with crises and remain competitive.
Problems and risks of downsizing
Although strategy can provide significant benefits, it is important to remember that every stage of the process is accompanied by crises and possible obstacles. To successfully implement this strategy, you will need to consider the following factors:
- Psychological stress and motivation. Downsizing will create a feeling of instability among the remaining employees, which will lead to a decrease in motivation and productivity. Today, companies are introducing employee support programs such as coaching, stress management training and psychological support.
- Corporate culture. Organizational spirit is one of the most important factors that influences the success of an enterprise. As a result of downsizing, culture may be at risk. Some firms use internal platforms to support corporate communication to maintain connections and reinforce company values.
- Load on remaining employees. When responsibilities are redistributed, this will lead to employees facing an increase in workload, which will lead to burnout. It is important to implement automation systems that will help reduce the workload and simplify routine tasks.
- Reputation problems. If you start reducing staff, this will lead to a negative perception of the organization both among clients and among future candidates. Maintain transparency and adhere to ethical standards in the dismissal process and this will minimize image risks.
- Quality of customer service. If, as a result of downsizing, functions that are related to customer service were reduced, this may lead to a deterioration in the quality of services. Companies should proactively consider customer support to reduce the negative impact of cuts on customer interactions.
Problems of virtual projects
- Lack of personal interaction. Online concepts often suffer from a lack of face-to-face communication, which reduces the degree of trust and understanding between team members. Regular online meetings are used to strengthen team spirit.
- Coordination problems. Time zone differences and remote work require flexibility in scheduling. Project management tools like Shtab and OkoCRM allow you to more accurately track progress and coordinate tasks between teams.
- Limited control and monitoring. When there is no physical presence, it makes it difficult to monitor the completion of tasks. Use analysis and analytics platforms such as Yandex Tracker and Yandex Wiki to help managers manage the project.
- Information Security Issues. With the transition to network projects, the threat of cyber attacks increases. Business owners invest in information security systems such as two-factor authentication and record encryption to keep their content safe.
- Technical problems.
Terms
Outsourcing – when external specialists are brought in to perform tasks that were previously performed by employees within the company.
Process automation — specialized systems are used to accomplish goals that previously required manual intervention.
Remote work – an employment format in which employees perform duties from home or another location.
Digitalization — the process of converting information and operations into digital format.
New trends in downsizing and virtual project management
Let’s look at a few key areas that help firms stay competitive and adapt to modern challenges.
- Integrate hybrid teams. With the transition to a flexible work model, companies are integrating in-office and remote teams, allowing them to optimize costs and increase agility. To ensure teams function effectively, businesses use a variety of digital tools and technologies. For example, many are implementing collaboration systems that allow teams to communicate, share files, and collaborate on projects in real time. This approach helps create a sense of involvement and synergy, and reduces the risk of losing corporate culture.
- Digital transformation of management. Network change in management processes introduces automation, uses big data and artificial intelligence. These technologies allow you to better control resources and tasks, as well as predict possible risks and needs. Digital transformation also helps provide real-time analytics and performance insights.
- Development and retraining programs for employees. The cuts that are inevitable during downsizing can affect the productivity and confidence of staff in the future. To reduce stress and maintain productivity, many have begun implementing reskilling and training programs. These courses help staff adapt to new roles and functions, which is especially important when implementing automation technologies.
Companies such as IBM and Microsoft are actively developing internal programs to retrain employees. IBM provides its employees with access to the IBM SkillsBuild platform, where they can learn a variety of technical and management skills. This approach helps organizations not only improve the skills of their employees, but also strengthen their commitment to the company and minimize the effect of burnout.
Examples of successful downsizing and virtual projects in large companies:
GitLab – a fully remote structure that specializes in DevOps management software, became one of the first fully remote organizations. GitLab has no offices and all employees work remotely, which has allowed the company to significantly reduce the cost of renting and operating office space.
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GitLab uses a special management approach called “asynchronous work”: staff can work in their own time zone. This allows the company to hire specialists around the world.
Slack Technologies was forced to downsize in response to the 2020 crisis. The business downsized and then transformed its teams to operate in a hybrid manner. Once a flexible working approach was introduced, it allowed the company to reduce costs and adapt to a changing market environment, while maintaining high standards of service and innovation.
Slack also actively uses its own product to monitor projects and support communication.
Conclusion
Downsizing and virtual project management have become essential tools for modern organizations that strive to adapt to constant change and survive in a highly competitive environment.
Each of the described approaches requires not only careful planning, but also a willingness to change.
Firms that are able to work productively with different strategies gain a competitive advantage and maintain a balance between efficiency and employee satisfaction.
In the future, we can expect that downsizing will become more personalized, and virtual projects will develop towards full digitalization. It is important that businesses continue to monitor new trends and adapt their monitoring methods in response to changes in the external environment.
Cover photo: Freepik
Source: rb.ru
