Tuesday 25 August 2015

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.

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Tuesday 18 August 2015

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.

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Tuesday 11 August 2015

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?

Doing Delegation Right, and Delegation - Art or Science? which I wrote earlier, might also help in making sure that things get done.

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.

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