Downsize even if you are still expanding, holding steady, or losing ground!!
This seems to make little sense, downsize even if you are still on a growth curve or holding steady? How does that work for us? Take a look around you, there are a many examples of this issue and the resulting effects. Mobil Oil even with 30% reduced revenue had a record breaking profitable year, figure that one out. It is because they reduced overhead and reduced payroll to support the anticipated downturn and ended up more profitable even with lower revenue. Like many Americans today, the business world is too fat. It needs to go on a diet .
Harvard University with the largest multi-billion dollar bank roll and endowment in the University world in view of its reduced value having lost much on the stock market, is still incredibly wealthy and yet they are laying off professors and embarking on a belt tightening austerity program. Why, Is it over responding? NO, it makes perfect sense.
Increased overhead and increased payroll is a disease. It is always present and frequently peaks, showing its tenacity and constant recurrence, always necessary to be beaten back and controlled. Growing overhead, too much payroll, excessive spending, seemingly ok while on a growth curve as revenues are abundant and profits significant, but it is the largest cost factor we have and we all seem to be willing to endure, unnecessary expansion of overhead especially payroll. It must be avoided in good times and routed out in bad times, its waste and must be controlled.
Here is what typically occurs: growth results in paying your employees overtime, and adding additional employees to handle the required expansion. In addition there are other requirements such as additional computers, or trucks, or work stations, more vacation pay, insurance etc. A better response would be to increase productivity and hold the addition of new employees and overtime down to a minimum. Be like Mobil, reduce payroll, overtime and expenses and increase profit in times of decline or in times in growth.
Growth by getting better and smaller not by getting bigger and paying more is a far better plan. The knee jerk response of adding employees and working overtime is the first instinctive decision and the wrong one. We must resist increasing overhead to accommodate higher demand and focus on training, incentives, team work, all contributing to greater productivity without increased overhead and payroll is the best answer to increased demand.
Lets look around, we are in a recession, most businesses are experiencing reduced revenues and lower profitability, requiring a downsizing effort and a tightening up of procedures controlling expenses and holding on to profitability as best as we can. Yet others are still experiencing growth and seem immune to the recession we are experiencing, some industries are in higher demand because they are recession proof. Used cars and auto mechanic shops are in greater demand as people are fixing or buying used rather then replacing with new vehicles. Thus despite the overall downturn, there is room for growth and expansion for some.
Yet there is a third area which is the area I want to talk about, its the business that may be experiencing a decline or an increase but takes out the cleaver instead of the surgical knife and cuts deep, very very deep. Deeper then the revenue reduction may require but in response to years of over indulgence. Over cutting, it may be claimed,unnecessary layoffs, taking advantage of the downturn to loose excessive employees and reduce overhead making the business leaner and meaner at the cost of employees and overhead.
In reality it is making up for years of unnecessary growth and development cutting out the fat leaving the meat.
Thus, if you are losing ground, holding your own or even expanding, CUT, CUT, CUT payroll, workforce, and overhead. I guaranty you have too much and if your efforts are focused on getting better not getting bigger you will be around allot longer irrespective of the economic climate.
Follow what Harvard and Mobil Oil are doing…allowing this wake up call, the recession, to drive home the point that we have overindulged and all must tighten our belts and cut back, irrespective of the revenue and profit picture, be it growing, holding its own or declining. Cut your overhead and tighten the ship, get better not bigger, even if you are growing.
This is the mission.
