Reducing Headcount with your Digital Transformation

Written By: Brian Potts
Date: June 11, 2020

While far less prevalent than two decades ago, we do still see it: companies leveraging efficiencies from their new technology to reduce headcount. It is not an easy discussion topic, especially in today’s world when layoffs and furloughs are at an all-time high, but it is reality. And reality needs to be dealt with.

Lack of attention to organizational design decisions like these is one of the major problems with organizational change management approaches. If you are an owner or department leader that has been tasked with headcount reduction as part of your digital transformation efforts, below are a few points of guidance:

Handle your own emotions first

Understand that this is a necessary part of your business growth and transformation, not just a simple off-shoot of having a new ERP solution. If you do not remain competitive and take advantage of market opportunities, you will get swallowed up and put your business at risk. Fact is, if you do not move with the times and clean up inefficiencies including over-staffing, far more peoples’ jobs could be at risk in the long-run.

With that said, for most of us the idea of letting people go is never easy, especially those that have done their jobs and given their lives to your company or organization. The stereotypical “Mr. Burns”-type tyrant is hard to find these days (although they certainly do exist), which brings personal emotions into play. This is one of the common ERP organizational change management challenges.

We recommend coming to an understanding that this is, in fact, the best move for your company before trying to navigate the communication of layoffs. Once you are comfortable with this task, then you will be able to make sound decisions moving-forward.

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Determining Logistics

The who and the when are obvious critical next steps to making the transition work.

Who: When deciding who will be let go, there will be some obvious low-hanging fruit. There are likely some individuals that have been in question for some time and who have been on the boarder of being fired anyway. There may also some folks who are approaching retirement and may even want to leave before the “fun” begins.

Beyond that, as part of your implementation preparation you should be looking at how you want your future state operations to look. By having a blueprint for future-state business process management in place, the decisions on firming up your workforce may become apparent. If not, this decision does not need to be immediate as you will still need most people around during the transformation. You can use the implementation as a time to find those who rise up to the occasion, and those who do not.

When: There is risk both in letting people go too early, as well as waiting too long. On one hand, letting people go before the business is ready could add stress to an already stressful time. You risk operations lagging, orders being missed and the remaining folks burning out. On the other hand, wait too long and you risk operations falling into the same inefficiencies you have been trying to replace all along. The key is to time the off-boarding with the implementation and process improvements.

Also, off-boarding does not have to happen all at once. Alignment with your communications plan will be critical especially if you take a multi-phased approach, but there can be benefit as this approach will allow the business to adopt to change over time as well as take advantage of some immediate gains.

Some processes will change faster than others, and some may not even need to wait until new technology is implemented. On the contrary, making a simple, one-time reduction can help increase confidence and potentially move the transformation along quicker.


Communicating coming layoffs is, by far, the most difficult for most of us (except Mr. Burns). Sharing with your workforce that you will be reducing headcount as part of the transformation can cause havoc and significant operational disruption if not handled correctly. As each transformation and organization are unique, you will need to customize your communications surrounding the coming changes and do so carefully. This should be carefully incorporated into your ERP organizational change management plan.

We will be covering this topic in depth in the next posting, but in the meantime, we recommend reaching out for guidance if you find your company in a position to leverage technology to replace personnel. Please contact us if you would like to use us as a sounding board for your digital transformation. We are happy to help!

Brian Potts

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