Performance indicator variance analysis as the statistical method for downsizing/rightsizing

Abstract

Purpose: This article elaborates method for downsizing/rightsizing in public sector enterprises, commonly burdened by the number of employees. Our goal was to develop an understandable, quantitative, objective, reliable and efficient method. Design/methodology/approach: The method design criteria were practical applicability, minimisation of subjectivity and maximisation of procedural justice. Our approach analyses performance indicators, and the amount of invested work, computing variability of the productivity time-series in the observed period. Excessive variation of ratio between performance indicators and amount of invested work indicate downsizing/rightsizing needs, as explained in the article. Method is based on internal benchmarking and thus in the first iteration it gives larger headcount estimation than comparison with industrial leaders, or best public enterprises, but it converges towards optimal headcount in the longer time span with more iterations. Main findings: This method has been applied in 21 different public sector organisation during the successful processes of downsizing/rightsizing, which identified a total of 1 819 redundant workers among 18 806 total employees. After the implementation of our method, we found that the application was the first successful massive downsizing program in that group of enterprises after more than five decades. Originality/value: A novel approach to analyse performance indicator as a measure to estimate downsizing/rightsizing goals. Conclusions/Recommendations: With such trait, it is appropriate as the first step in convergence toward the optimal number of employees. The lateral output of our method is that it demonstrates care about employee performance, tracks it and observes inconsistencies, and it offers a chance to employees to increase productivity in order to avoid downsizing.