Business DownsizeFor more than 25 years, the family business I was tasked to downsize had made it a policy to never layoff anyone. However, there finally came the day when it was necessary to break the policy. The business was being hammered by imports from China and the only way the company could survive was to lower the overhead and reduce the head count.

Developing the Game Plan

In order to identify a course of action, we started by reviewing the financials and modeling different scenarios for overhead and worker head count. This was quite mentally challenging. Being a family organization, there was a lot of emotion from all the parties involved. There was a union, long-time employees, and family members that would be directly impacted from the decisions made. After an emotional week of going back and forth on the numbers, our core team agreed on the production number we could support and the dollars needed to be reduced in each of the categories. We then translated those numbers into head counts and worked out a plan to downsize as efficiently and compassionately as possible.

3 Weeks and 3 Components

We agreed the plan should be executed within three weeks to ensure it could be done in a timely manner as to not draw out the emotional impact it would have on those involved. There were three components:

  1. Reduce unneeded expenses.
  2. Reduce management head count to the agreed upon number.
  3. Reduce the employee head count to the agreed upon number.

We started with management. We had several meetings and discussed the problems they already knew existed and elicited their support. We told each department what it’s final head count needed to be and for them to come back and meet two days later with their recommendations. Communication was vital at this time. We outlined to management why all discussions were not to be discussed with anyone. We kept our promise to keep them up to date on everything. We explained as thoroughly as we could how we were working to save the business. We educated them that, even though some individuals would lose their jobs, the company would be saved and the majority of the jobs would be saved instead of losing all jobs.

Management Pushes Back

Two days later we met with the managers only to learn that none of them had been capable of building a plan because they didn’t want to let anyone go. We ended up working with each supervisor on an individual basis to come to agreements on head counts. To be fair, we worked out unique solutions like sharing a particular employee that we did no want to lose between different departments. In the end, there was a lot of creative compromise. We realized it was a people business and to be successful everyone had to buy into the program.

Union Surprises Us

The next part was the toughest. We met with the union representative from each department and explained the situation as to why we had to reduce some jobs to save others. We found out fast that everyone already knew something needed to be done because the employees’ hours had been reduced. In short, they knew the business was in financial trouble. One of the union stewards stood up in our last meeting and said she knew we were doing everything we could and they appreciated our efforts to keep the factory open. This came as a big surprise. I had to turn around in the meeting and take a moment as it brought tears to my eyes.

Baseball Analogies Help

Going forward, we set up a daily meeting to review every expense and deleted those that were unnecessary. We also setup a monthly meeting to review all expenses in the future. In our first weekly meeting, there were a lot of questions from management. We explained it was like a baseball team. We had to have the top players in each position. It wasn’t that he or she wasn’t a good employee, it was simply that he or she wasn’t the number one employee. We could only have the number one player in each position. We wished each of them good luck, explained to them their severance packages, and told them we would give them any recommendations they would need. It is not easy to tell a long-term employee goodbye, but we did it with as much respect as we could. The following Monday morning, we arrived early to settle any problems that might arise. It went better than expected because of all the pre-planning. Within the week, it was business as usual.

10 Lessons Learned

I wish I could say that’s the only downsizing I’ve had to conduct. Unfortunately, it’s not. However, I’ve handled them all the same. Here are 10 valuable lessons my experiences have taught me:

  1. It needs to be done swiftly and at one time.
  2. You can never do too much planning.
  3. Everyone needs to buy into the program.
  4. It is always emotional.
  5. Everyone always knows what’s going to happen before it happens.
  6. There will always be problems that need to be worked out.
  7. You have to do what is needed in order to save the rest of the jobs.
  8. It is never easy to do.
  9. You are dealing with people and always have to put yourself in their shoes and treat them with respect.
  10. It never gets easier, but the first time is always the toughest.

Bonus Lesson #11: Don’t Go it Alone

The one last piece of advice I can give is simple: Seek guidance from someone who has done it before. They can help you manage the emotions and make the best possible decisions. They can also help support you as you deal with this challenging experience in your career. Everyone needs a coach – especially, when navigating a large business problem for the first time. Have you ever been part of a downsizing? What lessons can you share?

P.S. – Do you need an Outside Director, Advisory Board Member, Trusted Advisor,  or Interim CEO?  Someone who can help you see your business and your goals through “Fresh Eyes.”  Contact me and I will work with you to look at where you want to go and help you find the best way to get there.  Sometimes all it takes is someone with a fresh viewpoint, unencumbered by company politics or culture to help find the right solution.

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Larry Putterman
Board Director | Advisory Board Member

Avoid painful lessons learned. Let me help solve your business problems. A fresh set of eyes can show you a different set of possibilities. Use my experience to save time and money. I have been there and done that. What makes me highly effective is my fresh viewpoint, unencumbered by company politics or culture.


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