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Scaling Down, Scaling Back

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Trimming fat essential in current environment.

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My executive coaching clients across a wide range of industries are reporting unprecedented pressure to cut costs. Given the scale of the downturn in global markets, saving money is now a matter of life and death; appeals for cost-cutting have serious teeth.

The first thing executives tend to think of when the call comes in to cut costs: Right-size the staff. Lay people off. At Partners in Human Resources International, our outplacement division is booming, as you might expect. However, companies as diverse as aircraft and automobile manufacturers, clothing manufacturers and retailers, and entertainment and media companies are doing more than cutting staff. Many are turning back the clock.

"Remember how much you made before that 10% raise 2 years ago?" the HR professional inquires. "That's what you're making now. You just look older." As Yogi Berra says, "It's déjà vu all over again."

In some cases, the back-scaling even reverts people back to their previous titles, job descriptions and benefits packages. Archie Bell & the Drells' "Tighten Up" has become Tyrone Davis' "Turn Back the Hands of Time."

Suppose you're pretty well-staffed, though. You've run a lean machine. Unlike so many of your peers, you aren't using bad economic news as a red herring to mask lousy hiring, retention, and development efforts, resulting in a bloated and inefficient organizational population. How then can you cut costs without cutting head count?

In the January 2008 edition of Talent Management Magazine, Agatha Gilmore reports that US planned layoffs were up a whopping 275% in December as compared to December 2007. Gilmore goes on to say that, when you're already lean, you need to "Do more with less." Or at least, you need to do more with what you have.

In a 1995 study, William McKinley, Carol Sanchez and Allen Schick wrote that "[T]here is considerable evidence that downsizing does not reduce expenses as much as desired, and that sometimes expenses may actually increase." A Wyatt Company survey found that fewer than half of respondents who were using restructuring for cost reduction actually met their targets; only 22% of restructuring companies managed to increase productivity to their satisfaction.

To maximize returns while minimizing costs, keep the guiding principles of Constructive Confrontation in mind at all times:

Align all resources (labor, materials, external vendors and professional services) with the strategic goals of the organization. Sound simple? If this had been done in a skilled and streamlined manner, the organization wouldn't be in danger. My motto: "Align what your people do best with what the organization needs most."

Involve everybody at every level in their part of the effort. When people know why they're doing what they're doing and how it fits into the big picture, they better appreciate and comply with the need for them to maximize productivity and minimize costs right where they are - particularly if it keeps the organization from shipping their jobs to Uruguay.

Confront threats to productivity and profits sooner rather than later. CEO stands for "Confront early and often." An unwillingness to confront small issues or illogical ideas gives them time to metastasize, becoming huge issues and colossal disasters.

It doesn't take courage to confront in a constructive way. It takes common sense. The only reason my grandmother said, "A stitch in time saves nine," is because it didn't occur to her to say, "Duh."

Confronting sooner rather than later increases accountability and decreases conflict by keeping people better informed and more engaged. Failing to confront potential or emerging problems early and often will lead to bloated organizations that need to turn back the hands of time to make ends meet.
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No positions in stocks mentioned.

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