According to cost reduction expert Steven Martin, 'Mass layoffs are management's way of telling you they were asleep.' Here are his recommendations for making sure things don't reach that point.
This list is excerpted with permission from the article "Layoff: A Four-Letter Word in Any Economy," by Steven Martin, president of Profit Professionals of Business Solutions - The Positive Way. The organization's primary business focus is helping companies achieve cost reduction and profit improvement, eliminating the need for layoffs.
Here are 20 thoughts on how to prevent destructive layoffs in companies of all sizes.
#1: Do the right thing all the time. This means making the tough decisions not to hire in the first place or replace less productive positions. Use attrition to make the necessary cuts. Make the tough decisions now rather than later. It just gets more complicated with time.
#2: Hire well. It has been difficult in recent years to find good people. But sometimes it's better to have a position vacant than to hire poorly... especially in management. One bad manager can take down tens to thousands with them.
#3: Stay on a low fat diet. Exercise and keep your company fit by continuous improvement. Productivity is the intermediate measure of health and if it's not always going up, you are becoming less competitive.
#4: Use your resources wisely. I call this CEO, or Cost-Effective Organization thinking. Manage your financial, time, people, space, knowledge, energy, and material resources well.
#5: Read the tea leaves. Use both the pessimistic and optimistic views of the economy to shape your business decisions. Some of your companies are so large you have your own economists, and we all have the Federal Reserve and others. Listen to them (with a grain of salt) and test the party line against reality and the predictions.
#6: Partner. Partnerships and joint ventures can allow you to leverage your core resources and push the variability to others or reduce it.
#7: Have everyone in the company on the team. Use methods such as the Profit Improvement Process to give everyone some level of influence over and responsibility for profits. It sure beats the adversarial approach.
#8: Stop being selfish. Make decisions for the greater good of the corporation instead of the insular betterment of top management. Your people just may be more important than your bonus.
#9: Beware the siren song of "across-the-board." You may find that your company has a 10% disadvantage in the market, but a 10% across-the-board cut is guaranteed to take out muscle as well as fat. Adjust your business unit by unit.
#10: Listen to the pessimists. Those naysayers you are tempted to quash have something important to say. Listen but then take positive action on that negative view.
#11: Prepare your contingency plans. You are much better off to have a plan to review if something bad happens than to have to invent something in the heat of a crisis.
#12: Use overtime. Covering peaks in business with overtime allows you to scale back without layoffs when things slow down.
#13: Manage your inventory. If you have missed the economic tea leaves, your next indicator may very well be your inventory or backlog. Anticipating a slowdown can mediate the impact.
#14: Don't expect to placate stock analysts with a mass layoff. There is unlikely to be a long-term positive impact on stock price just because you announce a cutback. It may be a cop out.
#15: Invest in new products. New products are the only prevention for premature obsolescence. If you don't develop internally, partner with those who do or buy new products. You must know where your products are in their lifecycles and plan accordingly.
#16: Invest in new processes and technologies. Keeping up with the Joneses is vital. Just make sure you pick the right benchmarks to emulate. Watch out for fads! For at least some period of the 1990s, mass layoffs were a fad.
#17: Watch your expansion. Expansion is fun, but excitement can create a fog that hides the pitfalls of rapid growth. This is especially true when capital dries up in the middle of a growth spurt. Build revenues based on contribution margin and profitability, not the top line.
#18: Check your egos at the door. Be a team player. Use your drive for success in a positive way rather than just for self-aggrandizement. The failure to look out for others has taken many entrepreneurs and managers down along with their employees.
#19: Stop shuffling the deck chairs on the Titanic. If a business unit isn't achieving its goals, it is unlikely to get better if you just shuffle the staff around. Find the fundamental problems and fix them. Start with the top people. They set the tone.
#20: If you have to make layoffs, do them the right way. Communicate, communicate, communicate, and get everyone involved. Have a clear and fair policy on what people are going to get. Take care of both the people being laid off and the survivors. Everyone will have pain and, hopefully, healing to experience. Help them. If you've run your company well to this point, they should understand that you have done everything you could to avoid this outcome. This will help you avoid future, bigger layoffs.
It's not easy to be a manager or entrepreneur today. It never has been, and it takes more than 20 tips to succeed. We always carry a responsibility for the people who work for us. This is our highest calling.