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Survivor: Managing Company Downsizing
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Times are tough and tough decisions need to be made. Make the downsizing decisions with the right information and tools.

Whether we like it or not, layoffs or downsizing time is here. Part of the recruiting and retention formula is knowing when to do corporate whittling and how to make the right decisions about doing so.

Obviously, the need to cut costs is the basis for making the cuts. But there are formulas and metrics that need to be evaluated and used in making those decisions.

In addition to consideration of what and who to cut, how and where, there are additional issues of how to manage morale aftermath and maintaining loyalty. And once you've made cuts, it is a very wise idea to maintain good relations with those who were outplaced in case you discover that the cuts were too drastic and you need to recruit them back into your shop.

Your first step, though, is to determine whether you actually need to make cuts and avoid them if possible. To avoid making cuts, you need to make absolutely certain that your staff, from bottom to top, is properly trained and performing at peak levels toward company goals. A recent study announced that companies born during meager times (such as now) in the early aftermath of the 1929 crash are the ones that endured over time. The reason? They had to be extremely disciplined and optimize their scarce resources at every turn. Thus, companies such as General Motors, Proctor and Gamble and many other well-recognized names are still with us and holding their own even now.

Say you discover, to your dismay, that cuts are indeed necessary. You came to that conclusion after studying certain trends, reports and other plant reports and metrics. John Sullivan, from Electronic Recruiting Exchange, maps out the types of reports and metrics that are the standard tools for making your downsizing decisions in his "Effective Layoffs: How and When To Do them" wherein he provides a general overview. He then gets into more specifics in his "Key Steps in Effective Layoffs."

Most significant, and a matter that most forget, is that you start your cuts with your managers, make certain that their training and understanding of company goals and management methods is solid, and that they use the metrics to make objective decisions.

It's here that you have to be extremely careful about how you make your decisions. Tensions are high because the sense of doom and impending removals has hung in the air for more than a short while. The rumors have probably been floating around for quite some time. People are edgy. If you make cuts on what has even the slightest color of subjectivity, you're setting yourself up for big problems later. In the least, you may find people suing you for wrongful termination, discrimination and many other assorted causes of action. It's imperative that the criteria you use for eliminating duplicate positions, the decisions you make about consolidating functions, and the measures for making those decisions are quantifiable and objective. If there is any possibility that you have made life unbearable by making unreasonable demands, rethink your measures. Compare your requirements of that one person compared with another who appears to be excelling. If the workload was different or the demands on the two were different, there is at least one issue you need to rectify before going further with your decision making.

Say you've waited until the eleventh hour to do your cuts. No need to throw the baby out with the bathwater and just start hacking excess bodies. Sullivan provides a "quick and dirty" approach to downsizing in his fourth installment. He provides some excellent formulas for decision making in this installment. If you don't already have a similar formula in place, it is more than worth your while to adapt his to your needs.

Interestingly, Sullivan points out that part of your decision overview is not just what's happening in your office or company but also what's happening as far as your competitor. Consider that when you let your people go, one of the places where they will look for new employment will be with one of your competitors. So you'll need to ask yourself how well they are doing, what trade secrets are going to them through your former workers, and whether they can handle the influx.

One thing neither Sullivan nor any of the other resources used for today's discussion talked about an alternative -- relocating to a location with lower costs and cost of living factors. When we're talking about cutting costs, a move is sometimes not viewed as a feasible option. However, if it's done well in advance of the eleventh hour and strategically planned, it may be the best alternative in the long run.

Meanwhile, we still have that employee aftermath and morale to contend with. More about those matters later.

Editor's Note: November 15, 2001:
The "study" referred to in the fourth paragraph is actually an article that appeared in the September 3, 2001 issue of The New Yorker magazine entitled "The Financial Page Let the Bad Times Roll" by James Surowiecki.

Also, it discusses businesses and magazines that started up during various economic recession and depression periods and have survived because, according to Surowiecki, "It prevented them from overexpanding and overreaching...."

More relevant to today's article, those survivor companies were extremely disciplined in recognizing the relationships "between effort and reward, product and profit."

Originally published November 12, 2001
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