Staff Reduction
The Most Difficult Decision

by James on January 12, 2009

Are you planning a staff reduction to survive today’s economic reality?

This is, and should be, the hardest decision a manager faces. Understanding the need to make the decision isn’t hard, if you are running the business effectively you will quickly realize that current revenue doesn’t support current staff levels, and staff reductions are necessary. The challenge is in the “doing.”

Of course it’s easy to make a sweeping cut, to ask department heads and/or HR to cut X dollars from the salary budget, but this approach, while addressing the short-term need, won’t set the business up for the future.

Now is the time to step back and think about your business model. How have the changes in the business landscape effected it? Which changes are permanent and which are a result of the recession? Which can you influence and which are out of your control? I suggest you do this to provide context for the difficult staff reduction decisions that lie ahead.

Given what you learned from the analysis consider the personnel you will need to drive growth in the new reality. Your goal is to make the needed reduction in salary expense without crippling the business and/or creating the need for expensive new hires once the dust has settled.

You also don’t want your valuable Intellectual Property walking out the door with a pink slip. And your Intellectual Property is not dependent on levels. Consider who in the organization has the knowledge and experience required to be effective in the future. Remember time marches on, there will be a future.

Hip Shots

  • Avoid sweeping staff reductions. They are usually not effective, other than short term, and may well limit the business’ ability to take advantage of the turn around when it comes.
  • What got you here won’t necessarily keep you going. Analyze your business ruthlessly. No sacred cows, purple or otherwise. Assess what the new market looks like and what the business needs to be successful.
  • Protect the business’ IP. Carefully consider who has the knowledge you will need to take full advantage of the turn around when it comes. This knowledge is irreplaceable.

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