This morning, I got a panicked call from the CEO of a rapidly scaling company. “I don't want to let any of my customer support team go, but I think layoffs are inevitable,” he said urgently. “The numbers are not good.” “Don’t do it yet,” I told him, knowing that decisions made under pressure are rarely the best.
Short term, layoffs will absolutely impact the bottom line by quickly saving money. Long term, layoffs might end up costing more than you saved. Here’s why: Studies show that layoffs can damage your brand, create mistrust and inefficiency in those who survive the layoffs, and lead to substantially diminished productivity and creativity.
Additionally, to consider layoffs is to take a good hard look at whether you are operating at maximum efficiency in the first place. If everyone is doing their best work in a job that is functionally necessary to move the business forward, there isn’t really anyone to cut. If you can easily identify positions to eliminate, chances are you are not operating optimally to begin with. Don’t wait for a catastrophic economic event to make critical personnel decisions. Now is the time to recession proof your business, and it starts with getting radically clear about what you are doing, and why. Before you lay anyone off, consider the following:
Before you layoff employees as part of your cost cutting strategy, get super clear about what you really want to be doing with your business (hint: it’s not everything, it is focused and clear). You might be clear in your head, but if you can’t articulate it with specificity that would allow someone to understand exactly what you see, your vision isn’t as clear as it needs to be. If the vision is blurry, even a little bit, your people are wasting effort. They are spending time seeking clarity, or doing work to try and prove their value that is misaligned with your vision. Get radically clear about your vision, and commit to “the thing” that gets you there.
Once your vision is clear, you need to be able to explain why achieving the goal/purpose of your business matters to your customer. “To your customer” is the magic phrase here. If your purpose is about you - i.e. you want to be the best so you can say you are the best - consider finding a way to see how what you do has an impact on others, and focus there instead. So, instead of saying, “our purpose is to be the best widget-maker in the Midwest” (clearly, it’s all about you and your widget making ego), try “our purpose is to be the best widget-maker in the Midwest so our customers always have access to top-quality widgets” (now, you are still the best, but it’s because you want to serve your customer). The businesses that can best withstand external threats and unforeseen pressures are those whose clear purpose resonates deeply with all your stakeholders.
When you have radical clarity about what you are doing and why you are doing it, you can then create an efficient organizational structure by function, rather than by hierarchy or job title. Function should always be first. Once you know what the essential functions are, you can define the key roles and processes. It should never be the other way around. For example, see if you can explain the purpose of each division as it relates to your greater purpose. Instead of “Operations,” it’s “accountable for successful delivery of the best widgets in the Midwest.” Instead of “HR,” it’s “accountable for attracting, retaining, developing, and inspiring the team that creates and delivers the best widgets in the Midwest.”
This process can continue at a more and more granular level - but every division, department, team, etc. should have a purpose that somehow ties to getting your customers the top-quality widgets they need and love.(See how much work you have to do before you can make an informed decision about laying off employees? We are just now ready to talk about them…)
When your vision is radically clear, you know why you (and others) care, and you understand what functions are essential to achieving the goals, you can NOW look at the required roles and who needs to fill them. This is the fun part: figuring out how to maximize the gifts and talents of your people. What is each person amazing at doing, and where can they move the vision forward with ease and joy? Keeping structure and accountability through your functional organization, position your team members where they naturally excel so they are able to use their gifts and talents to supercharge productivity and results.
You will be shocked at how much untapped talent lives in your business, and how excited people are to be asked “what do you really like to do?” What happens if you have an employee who doesn’t want to opt in to the vision, or doesn’t care about the impact you are having? Or maybe they are really stuck to the org chart titles and just want to climb the ladder to say they got to the top? This person might not belong on the team. If it’s not a good fit for you, or them, don’t move them to another division. Help them exit gracefully so they can find an organization that will be more aligned with their interests, and fill your team with people who are excited to use their talents toward the common goal.
Of course, it is possible that you might do all of this and still end up having to lay some employees off. But if you act now to get radically clear on how to operate with optimal efficiency, I’m betting your layoff decisions will look completely different than if you wait until your back is against the wall. And, your layoff decisions will be far more likely to have the kind of bottom-line impact you REALLY want, which is one that is positive in both the short and long-term.
In case you are wondering, the CEO who called me this morning decided not to layoff some of his customer service department. Instead, after some deep introspection into what he is really striving to do and why, he decided instead to eliminate a project that isn’t aligned with his real vision, and cut all the costs (not humans) associated with it.Implementing radical clarity in your business is always a win. If you're interested in direct insights on how to get radically clear about what you are doing, and why, subscribe to our newsletter.