Downsize This

Posted by | June 07, 2013 | Growth, Small Business, Start-ups | No Comments

The winter of recession has seen many companies going under, but those that have survived should now plan to move to the next level.  Some organisations were always going to be immune from the recession, operating in high-value market niches or working on very long-term contracts.

Despite what you might read elsewhere, there are companies emerging from the economic turmoil with full order books, taking advantage of improved terms from their suppliers and the availability of good people; but a recession is always the time for some belt-tightening.

The prudent finance director will have reviewed their company’s costs and made savings without reducing the quality of their products and services. But it is also common in hard times for there to be some down-sizing, starting with those who are clearly unproductive.

This can be a personal nightmare for an entrepreneur who started their company with the best intentions and grew the organisation during the boom times without much thought about the inevitable ‘rainy day’. Sadly, the evidence for losing certain people may be overwhelming, and may include some personal friends who were with them from the beginning.

This evidence should not just be anecdotal but also be the output of a formal review process where the individual’s personal targets and the metrics for measuring success were mutually agreed in advance. The first time there was a problem support was offered, but it was also made clear that unless performance was improved, there would inevitably be a parting of the ways.

The reasons for people not performing at work despite the full support of management can be complex, and the wise entrepreneur remembers the advice of their mentor or non-executive director and appoints a human resources professional sooner rather than later.

Entrepreneurs can be very emotional people, and many have told me their worst business experience was sacking staff. For some reason their former best friends had gradually turned into ‘psychological vampires’ affecting everyone else in the organisation, reducing their productivity as well. Eventually the underperforming member of staff is let go, but the entrepreneur can face legal action if the procedure of the dismissal did not follow the letter of the law.

Once the sad but necessary work of downsizing has been done, careful thought must be given to the rest of the people in the company, the survivors. There will always be some unfounded rumours circulating about the recent lay-offs, and despite the optimistic messages put out by management, people will still be fearful for their employment. Even though the rumours of further cutbacks may be unfounded, the best people may already be looking elsewhere for new opportunities.

My advice is always to address these concerns head-on at a company event, but not as a formal presentation by the managing director. A much better approach is to deliver difficult messages as part of an interview by an experienced external moderator, who must be allowed to ask the really hard questions, the ones that are on the audience’s mind.

The managing director must answer frankly and openly, but has the advantage of knowing the questions in advance. They can prepare accordingly, safe in the knowledge that, while the questions may be direct, the inquisitor will not ask any unplanned, awkward questions.

Once the bad news is out of the way and the unfounded rumours firmly put to bed, the next part of the day should be about the management’s view on the best way forward; after all, they are the people responsible for future strategy and its implementation.

Good leadership is all about having a vision for the future and clear communication of how this will be achieved. But it is also important to be inclusive; the biggest complaints from unhappy staff are that no one listens to them and they feel they cannot make a difference. People should be given a chance to review the strategy and implementation and given an opportunity to present their own ideas.

People in a company are always closer to problems and customers than the management. If given some encouragement, staff will always generate good ideas for improving the business, especially if you also give them the personal responsibility to implement their own ideas themselves.  Not all ideas will work, but should be regarded as worthwhile, a useful learning experience.

Downsizing is a tough experience for everybody, but when done correctly it always makes the company stronger and better positioned for future opportunities.

About Mike Southon

Mike Southon is a serially successful entrepreneur, best-selling business author, mentor and one of the world’s top business speakers on entrepreneurship, intrapreneurship and sales.

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