Profitable revenue growth is seductive. Bloated departments, marginal workers and outmoded priorities are often ignored. Extra layers are added. Then revenues shrink, major customers walk, profit margins decline, and operating losses rear their ugly heads. Suddenly everyone—investors, creditors, directors—are demanding change yesterday. Occasionally even the CEO can see that stressful days lie ahead….
A visionary management team will prune as it grows, but by far that is not the norm. If you have done that skip the rest of this chapter. For the rest of you, there comes a time in the life of most every organization when crisis forces an employment reduction. Most organizations deal with crisis when, and only when, it occurs.
Whether you call it forced reduction, downsizing, shrinking, or “right-sizing” (a wonderfully frustrating example of corporate non-speak), the process will never be pleasant. But by making tough decisions and refusing to take the easy way out, a CEO can make an astronomical difference for the corporation’s sustainable future success, and successfully beat the bloat.
The five workforce reduction techniques typically utilized are: bonus-induced voluntary termination; attrition; across-the-board reduction; targeted workforce reduction; and (my nomenclature) cut and fill.
Although I don’t have the data, I totally believe in the direct correlation expressed in the graph between the degree of difficulty of each approach and its long-term benefits. It reflects my experience and observation, it fits the idiom “you get out what you put in”, and it makes common sense. Too bad, many CEO’s choose to hang out on the left side of this graph, not being willing to do the hard work and make the tough decisions; instead hoping to short-term impress distant observers with short-term memories (like share holders). In the next weeks I’ll explore each of these methods.
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