Downsizing: Planning
“Downsizing” (the
polite way of saying “firing lots of staff”) is a traumatic time for everyone
involved from those who are being “let go” right through to the CEO. Planning a downsizing is essential if the
business is to survive with stakeholder, customer, supplier, community and
regulator relationships intact.
There’s no easy way to plan a downsizing as so much will
depend on the individual organisation, its market position, its financial
strength, whether it is highly regulated, whether it requires specialist skills
or is a “niche player” and a variety of other factors.
For the purposes of this article, I assume that the business
relies on selling goods and/or services to paying customers. For me, the main areas of focus would be:
Business cycle
“Fixed” vs “Floating” cost base
Financial strength
Sales
Customer Service
Purchasing
Other support functions
Management layers
Legal/regulatory considerations
The community at large (including press)
Business Cycle:
Is your business subject to “peaks” and troughs”? Is everyone else in the same position as you
are? If so, you're all in the same boat
and your business isn’t unique in the problems it faces. How long can you sustain yourself in a
downturn (see also “Fixed” vs “Floating”
Cost Base and Financial Strength
below).
“Fixed” vs “Floating”
Cost Base:
“Fixed” costs that do not vary, e.g. rent for premises. “Floating” costs are those that vary
depending on the situation, e.g. commissions paid to sales staff.
When business volumes are rising, you want as much of your
cost base as possible to be fixed (you retain more profit). When business is slowing down, you want as much
of your cost base as possible to be floating.
Most organisations have a mix of the two.
The most significant element of most businesses’ cost base
is usually “Staff Costs” (salaries, pension contributions, other benefits,
etc). This is, for the most part,
“fixed” and is one of the reasons that many businesses are “outsourcing”
processes/services and moving to “zero hours contracts”.
Beware of eliminating staff simply on the basis of their
salary. They could be your highest
performers or the ones with all the vital customer knowledge and you’ll be
throwing the proverbial baby out with the bathwater.
Financial Strength:
A business with cash in the bank is better equipped to ride
out a slowdown. During the last UK
recession, banks noticed that businesses were paying off loans and relying on
cash reserves to reduce their finance costs.
If you can ride out the storm without sacrificing staff,
you’ll be in a better position when times are good as you’ll be ready to meet
increased demand. So what if
shareholders have to suffer lower dividends?
That’s a risk they take. If you
spend a lot of money on retrenching staff only to have to re-hire them 2 years
later, no one will thank you…
Sales:
No sales = no money.
If you rely on selling goods/services, you want to keep the team(s) and
people responsible for bringing in the income as intact as possible. Yes, you
can afford to let go those who aren’t contributing, provided that you know whether
this is within or beyond their control (e.g. difficult market, unrealistic
targets, unsuitable product/service).
Customer Service:
Most of the same arguments above apply here as well. The people who keep your customers happy are
just as (if not more) important than your sales force. These are the ones who have to work out why
things may have gone wrong and then put the situation right or you lose the
customer. Same logic applies with
non-performers though.
Purchasing:
Depending on the nature of your business, you need people
who can get the best possible raw materials/goods at the lowest possible price
whilst maintaining continuity of quality supply(ies). You may
have to sacrifice quality temporarily, but if your purchasing department has
good relations with quality suppliers, they may be able to help you weather the
storm though lower pricing if they want to keep you as a buyer in the long
term.
Support Functions:
HR, IT, Audit, Compliance, Finance are Cost Centres. They cost
money, but don't bring in revenues. They
are a “necessary evil”, but my advice would be to make more cuts in these areas
than in Sales and Customer Service. The
nice people who pay for your product or service will notice if their usual relationship manager or sales person
isn't around, whereas they don’t care about HR.
What is the proportion of Support Staff (how many staff out of your
total headcount don’t deal directly
with those who buy your goods/services)?
If more than 25-30%, you could trim some fat here.
Management Layers:
No organisation should have more managers than workers
(except in very special circumstances). Equally, do you have too many layers of
management, slowing down decision-making and taking action whilst the different
levels give their approval? If this is what your organisation looks like, ask
why and take action.
Legal/Regulatory
Considerations:
In Support Functions,
I commented that they were a “necessary evil”.
You will need accountants,
lawyers, HR managers, particularly if you are in a highly regulated business
(e.g. banking). What do you actually need? What can be outsourced?
Equally, there may be strict labour laws that govern the
dismissal of staff for reasons other than gross indecency, bad behaviour or
fraud or theft. You may also have to
consider potential Labour Union involvement.
The Community At
Large:
What impact will downsizing have on the local
community? Will it affect the local
economy? Will it mean a backlash in
terms of reduced purchases from your business either locally or countrywide,
precipitating an even worse crisis? What
will shareholder or media reaction be?
Support:
Can you provide any support to those being “let go” to find
another job? This may go some way to
defusing any potential resentment or backlash mentioned above.
Don't let these questions stop you taking action, but do use them (and any other
considerations relevant your
business) to plan things properly.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial
services around the world running
different operations and lending businesses, I started my own Consultancy to
offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Customer Care, Financial, Leadership, Strategy
Conformity Can Kill
It’s normal for
organisations to expect employees to conform to company rules, regulations and
standards. The problem is when they
start requiring them to conform to the same pattern of thinking.
In animals, we see what is known as the “herd mentality”. There’s a reason for this: a large number of
similar animals around you means safety in numbers. If you all look the same, it’s more difficult
for a predator to pick any one animal out.
Predators usually eat the animals who are separated from the herd,
young, sick or old. In the past, people
banded together in tribes for self-protection and survival. Nowadays, nationality, religion, region and
even Facebook pages unite us.
The same happens in businesses where employees may all dress
the same, use the same “jargon”, and tend to behave the same. Anyone who doesn't can be labelled a “rebel”,
“maverick”, “trouble-maker” or “non-conformist”. The film Divergent
examines what happens when people who are divided by “factions” based on their
inclinations can’t see the “bigger picture” and are unaware of a conspiracy by
the head of one faction to dominate all others.
Conformity may sit better with the Confucian “group ethic”
in which everyone strives for the collective good: usually family first, then
employer. Westerners generally tend to
be more individualistic.
I enjoy watching group behavioural dynamics at play to
determine who’s the:
- “Pack Leader” or “Alpha” (it’s not always the team leader);
- “Conformist(s)” who always “go by the book”;
- “Yes people” who
always agree with the “Alpha” or Team Leader;
- “Loner” who’s “out of the group”;
- The “Rebel” or “Original Thinker”.
There are two trains of thought in business: one is that the
non-conformists/rebels/mavericks may actually be the key to future success. The other is that organisations need to learn
how to deal with people who don’t relate to others easily. Getting used to working with people who may
not be as “touchy feely” as the rest is a new philosophy that has yet to gain
wider acceptance, but may be a way to retain a competitive edge.
To function effectively, teams need people with different
preferences and inclinations. Drs. Meredith Belbin, Charles Margerison and Dick
McAnn identified nine different typical team roles. Every team member is capable of playing every
role, but will have a preference for one or two over the others and will
certainly feel most comfortable in one over all others.
Any effective team will contain a mix of all these
types. That means that you need people
who don’t always think or approach things in the same way. If only one type exists, the team will miss
opportunities.
Flexibility is key in today’s competitive environment. You can’t react quickly if you're bound by
too many rules. Large organisations tend
to encourage conformity in terms of behaviour, dress code and work environment
and reward it with money and promotion.
Worse, some leaders with strong personalities won't tolerate anyone who disagrees with them. These can lead the organisation to destruction.
The only predators out there are the ones competing with our
business. We need to remember the lesson
of Charles Darwin: only the fittest survive.
Some species of animals that tend to be “loners” without the protection
of a herd or pack have developed their own survival mechanisms in the shape of
poisonous fangs, spines or skin. These
are the ones that others avoid (remind you of people)?
I’m not advocating organisational anarchy by suggesting that
everyone wears what they like, or that they behave as they feel, rather than as
professional courtesy demands, but I do feel that it’s time that we think more
about appreciation of the individual.
Today’s “Knowledge Workers” can think better for themselves. They need guidance, not blinkers.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial
services around the world running
different operations and lending businesses, I started my own Consultancy to
offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.Labels: Leadership, Productivity, Risk, Strategy, Teamwork
Communicate, Clarify, Control
The job of every
leader and manager is make sure that their people:
- Know what they’re
meant to do and why;
- Know how they are to
do it (and any limits on freedom of action);
- Know that the leader
will control what’s going on.
Sad to say, too many leaders feel that it’s enough just to
give an order. I once spent three months
with a client setting up various processes for him. Two years later, he told me that nothing had
been done to implement and maintain them.
When I asked if he (as the
leader) had actually followed up and made sure that things were done, he didn’t
answer. He’d said that things should be
done, after all…
This leader hadn’t followed what I call the “3 Cs” of
leadership in getting things done:
- Communicate
- Clarify
- Control
(some may call this “Check”
instead)
At best, he’d only done the “communicate” bit and simply
expected others to follow up.
Another case involved an industry group that wanted to have
the staff who worked in that industry trained to certain professional
standards. They spent a considerable sum
of money sending five staff to be trained as trainers in another country, but
couldn’t then clarify what they
actually wanted. It was left to the
trainers to work this out from vague remarks made by the group committee
representative.
Needless to say, this resulted in considerable delays whilst
the trainers asked for guidance, were told to “just get on with it” and then
produced something that, in the committee’s opinion, wasn’t what they actually
wanted.
One of the problems that leaders may face is that they’re so
busy that they may have limited time for the “clarify”, let alone “control”
aspects of their job. Equally, they may
feel that being too “controlling” implies to their staff that they don’t trust
them to do the job right. This results
in a situation where if they don't spend time on these, they’re likely to spend
more time sorting out the resulting mess afterwards.
They key is balance. A leader has a perfect right to check up on
what’s going on with a project that they’ve delegated. This is to make sure that:
- Things are on course;
- Any additional clarification that’s needed is given when it’s needed;
- Any errors can be rectified.
If you have a highly competent team, then you can allow them
more freedom. If the project is one in
which they have little experience, a firmer hand may be needed until you're
happy that they can manage on their own.
It it’s important, then definitely
control.
This implies that you also need to understand the strengths
and weaknesses of your team and the individuals who make it up. Who can be trusted to “get on with it”, and
who needs more supervision?
Sometimes you have to invest time to save it in the long
run…
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial services
around the world running different
operations and lending businesses, I started my own Consultancy to offer
solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.Labels: Leadership, Productivity, Strategy, Teamwork
