Cutting carefully preserves the essentials and sets you up for success down the road
It’s a situation no business owner or CEO wants to face, but sometimes it’s unavoidable. The economy falters, profits tumble, and you must find a quick way to reduce costs. That could mean cutting jobs, cutting services, and maybe even cutting departments.
But while you’re doing all this cutting, be mindful of which tool you use. Approach downsizing with the precision of a scalpel, not as if you’re using an axe.
Axes hack. They clear brush and decimate trees. Scalpels cut cleanly and precisely, removing bad tissue and leaving as much healthy stuff behind as possible. See the difference?
Downsizing works on the same principle. If you do it precisely, strategically, and gently, you’re going to preserve a lot more of the healthy tissue—better morale for remaining employees, all your important players and departments still in place, and a real plan (not just a knee-jerk reaction) for the future.
So, what does it look like to downsize with a scalpel?
1. Prioritize the most valuable pieces of your organization
This may sound like obvious advice, but during the initial scare of cutbacks, it’s good to be reminded:
Avoid making hasty assumptions about what to cut just so you can feel like you’re “doing something” about the emergency. Instead, take time to truly examine which parts of your organization are functioning efficiently, serving your core base of customers, or providing a vital function that the organization will suffer greatly without. You don’t want to make big cuts and get more than you bargained for in long-term repercussions.
Once you’ve identified what’s working well for the main portion of your customer base, the needed cuts will become more evident.
2. Don’t automatically cut an entire department once you’ve decided to downsize it
Even after you identify what’s on the chopping block, come to that block with your scalpel.
Just because a department or service isn’t cutting the mustard in lean times doesn’t mean everything and everyone that touches the department has to go. Some jobs may need to be eliminated. You might cut down on overhead or shrink some of the variety in your services. But some inefficient departments may just need a little trim to become leaner, meaner, and more functional – and some valuable employees could be re-tasked to different or somewhat altered positions.
If you go to the entire problematic department with an axe (or a chainsaw, to freshen up the metaphor), you’ll never find out.
3. Be intentional, thoughtful, and careful in your communication with employees
Emotions run high when the word “downsize” gets out. Workers who’ve dedicated years to your company envision job loss and financial hardship at home, so you can’t afford to be slapdash about how you communicate the challenges.
Don’t sugarcoat the severity of the situation. That’s irresponsible. But careful attention to the communication means you also deliver the news in a compassionate way. Stay open to employee questions and feedback. Communicate clearly why certain cuts have been made, and why others have not, so workers don’t walk around under a cloud of uncertainty about whether their job is rock-solid or in line for the gallows. Be willing to make visible financial sacrifices yourself, so employees don’t feel you’re cutting into their livelihood to protect your own lifestyle.
4. Ask your employees to contribute ideas for getting leaner and saving money
Yes, employees need you to be the stiff-upper-lip leader who fearlessly guides the company through uncertain times. But don’t maintain the illusion of being the only person with solutions.
Your employees, after all, know the company. They work here, remember? Employees who specialize in different areas may have a lot to say about how their little corner of the company could function better, faster, and with less.
To really make employee crowdsourcing work, you’ll have to do three things. First, make sure they don’t fear embarrassment or consequences if their idea doesn’t work. If people think a bum suggestion might get them shamed (or even fired), they won’t make any. The fewer suggestions you get, the fewer solutions you’ll be in line to discover.
Second, be ready to listen if they think your ideas won’t work. Remember that bit about how they work here and are intimately acquainted with their little corner of the company? You may have a plan for their department, but they may spot problems with implementing it that you aren’t even aware of. Stay open to their perspective.
Third, motivate them by sharing the cost savings of successful ideas. Monetary rewards and recognition in front of peers are always a win.
Downsizing will never be pleasant. No strategy can completely remove the headaches and uncertainty. But approaching the process as carefully as a surgeon will certainly make the experience a lot less painful for everyone – and hopefully, set you up for a huge bounce-back down the road when you return to growth.
Profit Point Consulting’s mission is to accelerate the growth of small and medium-sized companies through sound, strategic advice, and proactive financial management. If you need a trusted advisor to help develop and execute your vision, call us at (973) 659-1430 or fill out our contact form.