The arithmetic seemed compelling. At a mid-sized manufacturing company in Bengaluru, a team of ten engineers once managed production lines seamlessly. During an industry downturn, the company decided to cut costs by halving the team. The result? Remaining employees struggled with overtime, deadlines slipped, and product quality suffered. Morale plummeted as overworked engineers began quitting, leading to a vicious cycle of attrition and operational inefficiency.
This scenario is emblematic of a pervasive corporate fallacy. Companies across industries have long advocated workforce reduction without corresponding workload adjustment, promoting the belief that automation, restructuring and streamlining can bridge the gap. The reality is starkly different—such approaches typically redistribute burdens onto remaining staff, triggering burnout and plummeting morale. The consequent hidden costs frequently exceed the apparent savings.
The central question emerges: is genuine efficiency possible when fewer people shoulder unchanged workloads, or does this represent a shortcut to organisational dysfunction?
A case in point comes from one of India’s prominent technology firms. Following a global downturn in 2020, the company reduced its project management team by 40 per cent while maintaining the same portfolio of client projects. What initially appeared as a shrewd cost-saving measure quickly deteriorated. The remaining managers, now handling multiple projects simultaneously, struggled with coordination and quality control. Client satisfaction plummeted, and within six months, the company lost two major contracts worth more than triple the payroll savings from the redundancies.
“When fewer employees are expected to handle the same amount of work, burnout becomes inevitable.”
Rishav Dev, head, talent acquisition, Century Plywoods
Organisations implementing cost-cutting measures without adjusting workloads create an unsustainable environment for remaining employees. “When fewer employees are expected to handle the same amount of work, burnout becomes inevitable,” explains Rishav Dev, head, talent acquisition, Century Plywoods. Staff struggle against unrealistic expectations, leading to increased absenteeism and diminished job satisfaction. The resultant higher turnover creates a paradox wherein cost-cutting generates additional expenses through recruitment and training.
Headcount reduction without strategic planning often fails to retain optimal talent. Many organisations default to a ‘last in, first out’ approach, disregarding individual efficiency and contribution. This can result in the departure of high-performing recent recruits while underperforming long-term employees remain.
“Many organisations suffer from inefficient manpower planning, leading to redundancy and uneven workload distribution. In such cases, reducing excess workforce can improve productivity by eliminating inefficiencies and ensuring optimal utilisation of resources.”
Satyajit Mohanty, VP-HR, Dabur India
Dev recounts a revealing case from his childhood when his father, after decades in a government bank, opted for a Voluntary Retirement Scheme (VRS). The unintended consequence was that the most dedicated employees departed first, leaving behind less productive staff. The bank swiftly recognised its error and suspended further VRS payouts. This illustrates the critical importance of strategic workforce planning over impulsive headcount reduction.
Satyajit Mohanty, VP-HR, Dabur India, offers a nuanced perspective, noting that the impact of workforce reduction varies according to existing manpower planning. In optimally-staffed organisations, reducing headcount without adjusting workload significantly overburdens remaining employees. However, he observes, “Many organisations suffer from inefficient manpower planning, leading to redundancy and uneven workload distribution. In such cases, reducing excess workforce can improve productivity by eliminating inefficiencies and ensuring optimal utilisation of resources.”
“Employees spend more time justifying their work through exhaustive reports rather than focusing on meaningful contributions. This results in a workplace where efficiency is measured through paperwork rather than actual impact, slowing down operations instead of streamlining them.”
Anil Mohanty, CPO, DN Group
The assumption that all employees bear uniform workloads is frequently incorrect. Large organisations typically feature imbalanced workload distribution. The challenge lies in ensuring that headcount reductions do not disproportionately affect certain workforce segments.
Many organisations implementing aggressive efficiency measures institute micromanaged reporting systems, assuming tighter control yields better results. Such rigid structures stifle decision-making and innovation. Employees operating within overly bureaucratic frameworks become disengaged and reluctant to take initiative.
“Employees spend more time justifying their work through exhaustive reports rather than focusing on meaningful contributions. This results in a workplace where efficiency is measured through paperwork rather than actual impact, slowing down operations instead of streamlining them,” notes Anil Mohanty, CPO, DN Group.
When organisations prioritise efficiency over stability, they inadvertently foster a fear-dominated work culture. Employees perpetually anxious about job security tend to avoid risks and resist change. This undermines organisational resilience, hampering adaptation to market shifts and technological advancements.
An unstable work environment also damages employer branding. Companies notorious for mass layoffs struggle to attract talent, as potential recruits perceive such organisations as volatile and untrustworthy. In contrast, organisations balancing efficiency with workforce stability gain competitive advantage through a loyal, motivated staff.
Sustainable growth requires striking a balance between operational optimisation and maintaining an engaged workforce. Rather than focusing exclusively on cost-cutting, companies should adopt strategic approaches enhancing productivity while supporting employee well-being.
Strategic workforce planning represents a key element of this balance. Instead of implementing across-the-board reductions, organisations should align workforce needs with business objectives. Data-driven planning enables companies to retain appropriate talent, ensuring efficiency improvements do not compromise business continuity or staff morale.
Skill-based retention strategies are equally vital. Retaining employees based on skills, contributions and potential rather than tenure ensures high-performing individuals remain within the organisation. This necessitates robust performance evaluation systems considering both qualitative and quantitative metrics.
Beyond workforce adjustments, process optimisation can significantly improve efficiency. Enhancing internal workflows, leveraging automation and utilising AI-driven analytics can reduce inefficiencies without resorting to headcount reductions.
A proactive approach to efficiency also encompasses employee upskilling and redeployment. Instead of redundancies, companies can invest in training initiatives equipping staff with skills for evolving roles. Fostering transparency and trust is essential for sustainable efficiency improvements, with employee involvement in decision-making fostering ownership and engagement.
Efficiency and stability should be viewed as complementary elements of sustainable business growth rather than opposing forces. While cost-cutting may offer short-term financial relief, it often compromises long-term organisational health. True efficiency is not merely about doing more with less but making strategic decisions that optimise performance, retain talent and foster innovation. By shifting from fear-driven workforce management to a balanced approach, organisations can build resilient, high-performing teams driving lasting success.
