WHY IS DOWNSIZING SO DIFFICULT FOR BUSINESS LEADERS?

Rodney Davis: You know, probably the most difficult decision in any businesses is the decision to let go staff or to reduce the size of your workforce and that decision, I would imagine more CEOs have laboured over that decision than almost anything else, with the exception of shutting down entirely and no, it shouldn’t be your immediate reaction when things tighten up,  but it definitely has to be a consideration, depending just how much of a service delivery, versus a product based business you are. But when you start contemplating the decision to downsize, you’ve got to understand what the implications are, fewer bodies or fewer resources are to the ultimate delivery and quality of service delivery to your customers.

It may not be the answer. It may be that you are experiencing the decline because it’s a quality issue in the service that you’re delivering and therefore, maybe you need to possibly throw more resources that in order to get that quality where it needs to be. To get that revenue back to what it could be, if you’re delivering at the level that people expect, it could be that technology, rather than a revenue decline is probably more of a factor in what should determine the size of your workforce.

ARE THERE OTHER SOLUTIONS THAN LAYING OFF PEOPLE?

Rodney Davis: Absolutely. You might change your footprint, you might re-examine the workforce company relationship, there possibly are things within your labour contracts that some changes to that those could address some of the shortfalls you’re having as a result of your belt-tightening. And sometimes I’ve seen that very successfully discussed, where you actually negotiate with your workforce to make a few compromises and then you don’t have to let anybody go, you can manage through that with your group as a team and come out stronger on the other end. 

Companies shouldn’t get caught by surprise, in terms of optimizing their workforce or optimizing their product and or service delivery. In a previous conversation, we talked about benchmarking. I’m a big believer in benchmarking. I’ve seen benchmarking translate in one-to-one cause and effect or one-to-many cause and effect, in terms of improvements to the bottom line. And if you’re in a business where you are serious about it for the longer term, if you’re not considering what it costs for you to deliver your service or to drive customer growth, as it relates to what it costs your competitor or your peers, then you probably are going to run the risk of getting caught off side at some point in the future

HOW DO YOU KNOW IF YOU’RE OVERREACTING WHEN DOWNSIZING? 

Rodney Davis: Things like that should not be a surprise. If you’re constantly refreshing your understanding of how the key drivers of your business are working within your business, it’s going to come out of the numbers for you. And there are going to be early indicators, whether there’s going to be a tightening of the revenue because of fewer clients, reduced demand, increased competition, or whether there’s going to be the advent of new technology that your competitors have put in place that put them in a better position to deliver the same service, greater access to suppliers. You should be aware of your environment.

IS THERE A RIGHT WAY TO DOWNSIZE A COMPANY?

Rodney Davis: Firstly, you have got to do it humanely, and that means you have to communicate effectively, when it is time for you to communicate and you can’t do it with a broad brush. 

I see companies do it, where they universally just go equal parts across the organization, or they offer blind, voluntary downsizing without having a good idea of who’s going to accept that and then find themselves in a situation where people that they had hoped wouldn’t accept it, have accepted it and people that they hoped would accept it, have not accepted it. And then they’ve got a workforce that’s smaller, but far less effective than either they anticipated or than they had before.

Rodney Davis: The normal approach I’ve taken to downsizing and one that I’ve advocated with a lot of senior executive teams and often with great success is you take your organization chart, and you remove all of the names and you build the organization chart that you expect to emerge with. Once you’ve done that, then you put the names in boxes. In many cases, it’s obvious who goes in which boxes and in some cases, it causes you to really contemplate who goes in those boxes. But essentially, you build an organization chart, independent of the people who are in the organization.

Once you’ve gone through that exercise, you realize you’ve built the organization that you think you need to have, and then you take that and overlay your existing organization chart over top of that and it’s very revealing what you come out with. It sounds cold, but it’s actually very cognizant of who works for you, because in order to do that well, you should know what the skills are, what the habits are and what the strengths and weaknesses are of the people that work for you if you’re going to do that effectively.