The biggest mistakes made in downsizing.

Downsizing was not in this year’s plans for most small business owners.  No one predicted -or could prepare for- what is happening to our economy, and certainly no individual small business owner can be held responsible for his company’s downturn in view of an economic situation outside of his control.

However, failure to respond adequately and appropriately is an error we can avoid, as we can control the  action and response we make in response to the changing economy.

Here are a half dozen major stumbling blocks to review and consider in your downsizing plan.

1. Be stone cold realistic.  Acknowledge immediately, that this is not a trend that will soon reverse itself,  but is a new reality.  Our economy is severely damaged and what we have now is what we are going to have for a long while -years- and then we will slowly grow, a little at a time.  We will not see the burst of acceleration in values and growth and development that we’ve experienced over the past ten years again, for a long while.

The point:  Redesign your company based on a realistic evaluation of your worst case.  Protect your core most profitable business, the parts that make up most of your volume and  serve most of your customers.  Identify your top customers and make certain you are satisfying their needs, protect the core of your business.

Not getting small enough quick enough is a short path to disaster.  Do it all, do it in one swipe, re-design, re-implement and off you go.  Do it right…all the way…worst case scenario….severe cuts, bone chilling cuts.

2. Avoid across the board cuts or reductions, as well avoid shutting down entire divisions deemed ‘unnecessary’.  Pinpoint the best way to downsize while maintaining your full capability.  Cut your employee force in half, yet perform the same functions.

3. It is very important that you communicate early, often, and HONESTLY; it’s the right thing to do and will create great loyalty and support if done correctly.  You must acknowledge the need to downsize in order to survive.  You need to explain that the reasons are beyond anyone’s control thus there is no finger pointing, only team building, working together, digging in and winning the war…for everyone’s best interest.

Tell them you have the plan that will save the day and support your emergence.  Demonstrate that you believe in your plan, if convincing, they will follow your lead -as that is how they will judge the situation.  If you succeed here they will all support you and victory will be possible.  This is a key communication.  Do it well.

You must communicate your understanding and appreciation for the pain this is putting your people through and thank them for their support.

The potential cost to each and every one involved is huge.  There may be no other jobs available for a long time.

4. Go out of your way to demonstrate that you care about the employees being laid off.  Create the best possible exit program you can but most importantly demonstrate that you really care.  This will not only make this entire process much less painful and easier for all concerned to endure, the remaining employees are watching and assessing how you are handling this matter and if you do it with great care and concern for the employees they know you will be kind to them as well.

This is the stuff that makes teams come together, and people move into their discomfort zone, and perform better then they think they can.

5. Do not horde inventory…liquidate it, its a very expensive security blanket.  Get rid of it, take the ‘loss’ it’s really a gain of the use of locked up capital.  The cash is more valuable.  Business owners feel more secure with inventory, thus they hate to part with it and invest much too much money in in.  In a down sizing, get rid of it!

6. If you ask for reductions in pay or benefits, somehow demonstrate how you too are sacrificing, more then you are asking them to do.  Do something dramatic and showy that demonstrates this sacrifice.  Sell the Mercedes.

Cut deep, deeper then you believe you should.  Batten down the hatches and market like crazy.  There will be a smaller pie to divide up but you can get a larger share then you had even while down sizing.

Want some help? Call Norm at 413-584-2581 and he will arrange a no-obligation tele-conference for us to discuss your best strategy.