What has been a theme for many companies in 2026 regardless of size or industry? They have made the difficult decision to cut a portion of their workforce through downsizing. Several organisations have gone through company downsizing amid concerns about economic uncertainty as well as a desire to adjust their business headcount according to needs following the pandemic. According to CIPD’s People Management, 87% of HR leaders have recently made or are planning redundancies this year, making this a real possibility for many employees.
Company downsizing is an event that leaders hope to never navigate. However, with today’s volatile economy, it’s more likely that a leader will have to manage their employees through a company downsizing. It is also well known that downsizing can have a direct impact on employee morale and productivity from the ‘survivors.’
Kahoot, known for their learning and engagement platform and more recently workplace education and training, surveyed over 1,000 workers who remained employed following redundancies. They found that 49% of these employees admitted that morale and engagement declined afterward. Additionally, 84% were left teaching themselves new skills in the wake of their colleagues’ departures, putting a strain on time and resources. This emphasises the role of leadership in driving successful change, putting the burden on them to navigate a company downsizing judiciously and avoid these negative impacts.
What is the key to a successful downsizing effort?
Company downsizing calls for leaders to act courageously. Leaders need to have a steady presence, embrace change, and be empathetic through this sensitive event when their employees are feeling a range of nerves and uncertainty. It is not easy being a leader during a company downsizing, but here are three tips to help overcome this setback.
1. Have timely and transparent communication
As a leader, it is imperative that you share as much information as you are able. Leaders will not have all of the details from the beginning of a downsizing. However, your team will appreciate your honesty and openness with whatever you can share. A simple message detailing what you know, what you don’t know, and when you hope to get more information can go a long way.
Keep them updated on information as you receive it. In addition to expressing the facts, help them understand the reason behind the change. Managing organisational change is difficult, and one of the best tips for getting through change events successfully is with transparent leadership that communicates the rationale for the change and remains as positive about the future as possible. Share with your employees the new objectives and how they are intimately connected to those objectives.
2. Demonstrate empathy and compassion
All survivors of a downsizing company are going to feel a sense of uncertainty, anxiety, and apprehension. The thought “will I be next?” will be racing through their minds. Leaders who demonstrate emotional intelligence, compassion, and empathy will ease these negative feelings in their team. It is important for leaders to recognise that these negative feelings exist and to allow their team opportunities to share and process them.
Additionally, allow them the opportunity to ask questions. By creating an environment of psychological safety, employees will feel more comfortable doing this. This will in turn allow them to focus on moving forward. And, just as important, demonstrating this compassion for the team will create a sense of inclusion and belonging. This shared connection will help everyone to work together to achieve the company’s objectives moving forward.
3. Turn attention toward the future
After communicating the company downsizing and helping your team process the message, it is time to inspire them toward the future vision while acknowledging the current reality of a downsizing business empathetically. Make the connection of how they are part of the vision and make gratitude at work a habit. This helps your team members understand their value and how they are making an impact on the company’s future success.
The team may continue to have questions and doubts moving forward. Make sure that you prioritise their wellbeing and check in with them consistently. They may also feel a sense of uncertainty, but a leader’s role is to help the team realise how they can demonstrate their worth by working toward and achieving the company’s goals, thereby making them indispensable.
How to lead employees through downsizing
Company downsizing, while sometimes a necessary part of business, can unintentionally create negative impacts on the remaining workforce. Leaders are challenged to ease concerns and reinvigorate those who remain in order to boost morale and stay productive. By following the three tips above, leaders will be able to make the best of a difficult situation and hopefully come away with a team that feels a greater sense of belonging and motivation.
Nine essential elements for modern leadership
The requirements to successfully lead in today’s organizations differ significantly from the past, and leadership hiring and development processes can only be effective if the attitudes, skills, and behaviors measured align with demands of the modern, complex world. Optimize your leadership talent processes, and create an organization fit for the unpredictable future with our tip sheet, which will help you to understand the areas your (future) leaders need to master for sustained success.