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We’ve Downsized, Now What? posted on Thursday, 26 February 2009

Strategic Workforce Management: What to do before you make that critical mistake!

In my last blog, I provided employers four tips on how to downsize without taking their business under. Since then, I have spoken with several leaders who are weathering the residual storm of poor resource decision-making and the common thread in the conversation is, “We didn’t plan this very well.”

It’s true that a reduction in force may be the only recourse a company has. They may have already reduced costs as much as possible or the loss of a key customer eliminates the need to have a large staff. But too often the lack of strategic planning around the decision brings an additional strain to the business, one that can signal the final death knell to a struggling company.

One local employer recently laid off approximately 10% of their workforce after the loss of a key contract. In discussing the difficult situation with one of the senior managers left behind, I heard a familiar story:

1. They identified the wrong target. In this case, it was their payroll expense, and all the attention was focused on how many positions would need to be eliminated to reach that target.

2. They kept the company’s economic situation quiet. There was little communicated to the employees during the difficult year leading up to the workforce reduction. In the absence of information, most of us either imagine the worst or hope for the best.

3. The decision was made behind closed doors. Senior management held a number of off-site meetings where they determined the percentage of employees per department that would need to be eliminated to meet their payroll expense target. No departments were off-limits, even those that had already been downsized and had no “fat” to trim.

4. They failed to maintain the employees’ dignity. On the day the notifications were given, the affected employees were summoned to a meeting room where, en masse, they were informed of the lay off. These employees, many with lengthy tenure with the company, were escorted back to their workspace by armed security guards where they were allowed five minutes to retrieve any personal effects.

In my discussions with this senior manager, he recognizes that so many things could have been handled better. The resulting chaos has hindered their ability to move forward and realize any economic benefit from the downsizing. A short list of “woulda, coulda, shoulda’s” includes:

1. Reorganize in addition to the downsizing. Identify areas of redundancy and merge departments. When positions are eliminated, ensure that those remaining employees are “shored up” with resources, information and procedures. Consider that deep layers of management might represent opportunities for reorganization and consolidation.

2. Reengineer. Review process diagrams and assign names to the activities. This will help ensure you don’t eliminate a single point of failure for a business’ critical process. In addition, there may be cost savings in eliminating services or systems that could reap more benefits than eliminating head count.