Downsizing? Here’s How To Boost Employee Morale


When a business has to make a difficult decision regarding personnel, it ushers in a cascade of concerns. Downsizing, while lending to apprehension and even outrage, is often necessary for the business to survive. Amidst the uncertainty, it presents an opportunity for owners and managers to rise to the occasion. With a proactive approach, they can assuage employees’ concerns and maintain morale during this challenging transition.

Why downsize?

Several factors can lead a company to decide to downsize, whether they occur over a long period of time or an acute situation arises that requires quick resolution. While the ultimate determinant of downsizing is the company’s financial wellness, the contributing factors vary and can affect how and when the decision is made.

These are the most common reasons that trigger downsizing:

  • Cost reduction. A business may be the victim of a volatile economic environment. Perhaps surprisingly, even a strong economy can bring about trouble for businesses. As prices rise, spending power drops. For some businesses, this can result in a rapid loss of customers. When the bottom line is shaky, a business must respond or risk further problems that can quickly spiral.
  • Too many services. When a business has reached milestone after milestone, it can make sense to add to its offerings. However, growth can get out of control. With every service it offers, a business incurs costs in the form of time, money or both. There may come a time when eliminating services makes good business sense. This could prompt not only a change in employee retention but also physical downsizing, which could mean a change of location or going remote.
  • Restructuring. Restructuring may occur to both specific company roles and the overall company structure. For instance, a company might decide to decentralize its daily operations. Or a company might decide to combine two departments into one. In both cases, a reduction of employees, and possibly office space, could be in order.

How to keep employees motivated during downsizing

Downsizing is a challenging time for a business and its employees. It’s not a decision taken lightly. However, in some cases, the survival of a business depends on making cuts. The remaining employees will have a host of concerns. They may wonder if their job is safe. They’ll have questions about their duties in a restructured environment. They might be angry about the changes. Amid high emotions and likely confusion, there are ways to mitigate the discomfort — and they all start with strong leadership.


When downsizing is on the horizon, preparation is key. Leadership should have a plan to communicate the transition to employees and address any changes to daily operations. It may be necessary to reallocate responsibilities, which means employees will need a thorough briefing on how this affects their role.


Downsizing is a serious decision that no business owner or manager should take lightly. When making cuts is inevitable, an open line of communication is crucial. This means relaying information to employees prior to and after downsizing.

Equally important is a willingness to hear employees’ concerns, which are likely to include questions about why downsizing was necessary. While these conversations might be uncomfortable, they can ease employees’ concerns about their role and that of their fellow employees. Transparency is vital to boosting employee morale during this difficult time.


Since the Great Resignation during the pandemic, “people-centered” business continues to rise and be at the forefront of business conversations. Discussions about the workplace frequently center on company culture — namely, what it is and how to build it. Whereas company culture used to equal a nice break room with a good supply of snacks — and this is still part of the whole — the concept has evolved to mean much more.

Employees have a new set of expectations, such as open communication, performance feedback and incentives, thorough training procedures, a fun environment,] and flexible work hours/location. It behooves management to take action. In the wake of downsizing, taking a people-centered approach can make all the difference.

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