How to Downsize Using Performance Appraisals

by Lisa McQuerrey

Downsizing can be a challenging and emotional task for a manager. It is difficult to make decisions about which positions to cut and which employees are essential to a company’s success. Making choices based on performance appraisals is one way to use past performance as a criteria for determining which employees stay and which ones go.

Determine Essential Functions

Making a downsizing assessment based solely on performance appraisals is unwise, as there are other considerations that are part of the downsizing process. For example, if you use nothing but performance appraisal scores in making your decisions and the three lowest scores happen to belong to three key employees in your company, automatically eliminating those positions without having a contingency plan in place for covering the responsibilities of those roles will put your business at a serious risk. To be effective, make a decision about which positions are expendable or combinable and then use past assessments to make smart choices from there.

Use Recent Performance Appraisals

Employee responsibilities and corresponding performance fluctuate over the course of a career. In using performance appraisals to make downsizing decisions, use the most recent evaluations as a basis for making your decisions. This is the most accurate representation of the staffer’s current state of mind, dedication and contributions to your company. Take into consideration past performance only if extenuating circumstances affected recent performance and those circumstances have since been eliminated. For example, if a staffer was caring for an ill family member and had a slow earnings period, consider that a single anomaly if all past performance measures were above average.

Rank Crucial Appraisal Criteria

If you're making downsizing decisions for your company, chances are you're facing a financial crisis, struggling with an economic downturn or facing some other internal challenge that requires a reduction in payroll. If this is the case, an employee’s past documented performance as it relates to revenue generation should be a leading factor in whether they are retained or downsized. For example, performance appraisals that reflect high marks on continually meeting or surpassing goals and objectives establish an employee as a financial asset to the business. Likewise, employees who regularly fail to meet goals or don't have a significant or direct impact on earnings may be seen as expendable.

Utilize Appraisals in Layoffs

In making downsizing decisions, counsel staffers who will be let go. Describe the criteria used for making the cuts and have copies of performance appraisals on hand to demonstrate lack of goal attainment, diminished earnings and other factors that contributed to your decision. This helps employees see the decision-making process was not arbitrary and reduces the likelihood of an employee trying to argue with or dispute your decision-making process.

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