When facing an economic crisis, businesses often think of downsizing and cutting staff to survive.
However, according to Keith McFarland, author of the Wall Street Journal bestseller The Breakthrough Company: How Everyday Companies Become Extraordinary Performers, when implementing this strategy, businesses need to avoid the following mistakes.
Misjudged the scale of the layoffs. When cutting staff too much, the business will risk a decrease in revenue and quickly fall into bankruptcy. To avoid this mistake, before implementing staff reduction, business leaders need to jointly assess the situation, level and development of the difficulties that the business is facing.
Then, the business needs to determine the scale of personnel so that it can achieve the most feasible revenue level. Do not simply think that just having a good sales department or a new product is enough for the business to overcome difficulties. Remember, the success of the business is the result of the labor of the whole group, including many closely related departments and divisions.
Make cuts across the board. If a company cuts staff mechanically, cutting every department, things will get worse. In times of difficulty, business leaders must think deeply about the business model and focus on ways to cut staff so that they can protect or promote the core competencies of the business.
Remember that projects, initiatives, and even departments that are born in times of crisis are often not core competencies of the business. Know exactly how much revenue is generated by each customer group and product group. The business also needs to reassess its position in the market. Identify 20% activities that can generate 80% revenue and protect them at all costs.
Unable to show kindness and concern. Downsizing is a traumatic process for employees. Many business leaders feel guilty and try to alleviate this feeling by avoiding contact with those who are laid off. This only makes them look bad in the minds of their employees.
Therefore, when cutting staff, business leaders must show courage and keep their commitment by meeting with those who are laid off, helping them transition to new jobs, showing tolerance and sharing difficulties. Employees who have not been laid off will observe every expression of their bosses very carefully and if they see signs of indifference or cruelty, they will find a way to withdraw.
Cut staff quietly. For many reasons, businesses often do not publicly announce information about layoffs, and this often causes strong reactions from employees and departments that are laid off because they are not prepared in advance.
Therefore, it is best to give clear signals in advance about the severity of the financial difficulties the business is facing and its plan to cope with them.
TTO