How to approach workforce reductions while protecting your future 

Cost optimization done optimally: how to achieve your savings target while preserving the critical people, skills and morale in the workforce.

At the start of 2023, many organizations have been making significant reductions to their employee populations, from big tech to finance, manufacturing, restaurants, and beyond. There’s a sense of uncertainty in the economy right now, and organizations need to optimize costs to prepare for the unexpected.

While workforce reductions are often a necessary part of cost-cutting initiatives, there’s a way to approach them that looks beyond short-term savings and considers the long-term effects of these decisions and the potential for many different economic scenarios to play out. Leaders think back to the last recession to plan for the next one, but there is little rationale for applying 2020’s rules to 2023’s circumstances. When considering workforce reductions, it’s important to take a longer view — both into the past and into the future.

The time pressures are unavoidable when making decisions like this, and any decision that’s made under pressure is bound to be imperfect. But taking a short amount of time up front to apply strategic workforce planning principles and think more holistically about workforce optimization will help your organization minimize the severity of impact and bounce back much more effectively when the challenging economic circumstances have passed. The improved outcomes of a cost optimization process — retaining critical skills, not cutting too much or too little, and minimizing the impact on employee morale — grounded in strategic workforce planning principles and broad and company-specific workforce insights, will more than pay for the work you do now.

Mercer helps organizations think about more than which teams and roles to cut; we help you consider the skills you have in your workforce and need for the future, the potential waterfall effect of reductions on subsequent voluntary — and unwanted — attrition that can complicate workforce plans, internal and external economic data, and long-term resiliency. Based on these insights, we can run scenarios and help you make strategic decisions.

Related products for purchase
Related Solutions
Related Insights