Common Mistakes Businesses Make When Downsizing Their Workforce

by TMT Newswire

Common Mistakes Businesses Make When Downsizing Their Workforce, According to Salveson Stetson Group

Memo to Business Leaders: There’s Still a Talent Shortage Coming

RADNOR, PA – March 3, 2009 – Companies across the country are shedding jobs in an effort to cut costs, but many may find they have made some common mistakes that will cost them down the road, says Salveson Stetson Group, a full-service retained executive search firm.

“This severe economic downturn has forced employers to take a hard look at expenses and to make some painful decisions about lay-offs,” said John Salveson, a principal with Salveson Stetson Group (www.ssgsearch.com).

“That is an entirely appropriate response – but employers can also fall victim to errors in decision-making that could hurt them further in the future.”

Among the most common missteps companies make when downsizing are:

Not cutting deeply enough.

Downsizing is always a painful process for an organization. Many companies try to limit the impact by laying off as few people as possible, when in reality business conditions may call for more significant action. “Trying to spare employees pain by keeping layoffs as small as possible often backfires when a company has to go back and do a second round of lay-offs because they didn’t originally take the actions required to sustain the business,” said Salveson. “This ‘dribs and drabs’ downsizing strategy has a terrible impact on employee morale.”

Cutting staff without an eye towards the recovery.

Many a company has cut staff so severely that when a recovery does begin, it finds itself without the talent it needs to react to a strengthening market. Take the opportunity to evaluate business processes when downsizing to identify whether your now-reduced staff can handle an upswing in business when the recovery comes.  Alternatively, create a talent acquisition plan that is immediately ready to execute when business conditions improve in order to bring on the talent required to support future growth.

Neglecting the “survivors.”

“Many leaders are so relieved to get through layoffs that they forget to pay extra attention to the workers who are still employed. The employees who stay with your company often must take on more work with fewer resources – while still reeling from the loss of their colleagues. It’s true that some of your employees will just be happy to have a job, but eventually, that tape in their head that says, ‘Stop whining, you’re lucky to have a job’ will stop playing. And when that does, a committed employee starts down the path to becoming a former employee. Don’t let this assumption prevent you from being an engaged and present leader.”

Focusing too much on current economic issues at the expense of broader, demographic issues.

“Right now, every leader’s thinking is dominated by how bad the economy is. Many executives have lost sight of a broader demographic reality – an aging workforce still means a severe talent shortage is on the horizon. It’s true that many baby boomers are being forced to work longer – but it’s equally true that in a few years’ time, many companies will be looking at an empty talent pipeline. Now is the time to take appropriate cost-cutting steps – and it’s also the time to be planning for talent needs in the future.”

Failing to realize the cost of not filling a position.

Companies do a very good job of calculating the savings realized by eliminating a position, Salveson said. But rarely do they spend the same amount of time calculating the costs – some not so obvious – of leaving a position vacant. An unfilled VP of Sales job, for instance, might save $250,000 in salary and benefits; but how many sales might the company lose while the position goes unfilled? How much momentum will be lost in the market?  What about the stars on your team who leave due to the absence of leadership?

Salveson offers leaders and Human Resources directors these tips for making good talent decisions during trying economic times:

Look at your world in more than one dimension. Don’t operate solely in a here and now” cost-containment mentality. Make the hard decisions, but look ahead and begin anticipating future talent needs. Too many leaders are so focused on the crisis at hand that they are failing to acknowledge that the economy will recover and their talent needs will shift again.

Go out of your way to be more visible and accessible. Remaining staff need their leaders to be strong, confident, and present. Pay special attention to star performers and customers; you will want both around when the economy recovers.  Recognize that many of your younger, high-potential employees and leaders probably haven’t seen a downturn like this before.

Don’t assume they know how to manage through this. Use this as a teaching moment. Give them the tools and instruction they need to be a good leader.

Recognize that downturns always create opportunities. This may be an opportune time to make changes you’ve been contemplating. Have a compensation plan that’s outdated? Always wished you could get your workforce to collaborate across boundaries? Work more efficiently? Now is the perfect time to make a change. You’ve got your team’s attention, and the climate is ripe for a new way of operating.

About Salveson Stetson Group

Salveson Stetson Group (www.ssgsearch.com) is a full-service retained executive search firm founded in 1996. Specializing in $150,000+ salaried positions, Salveson Stetson Group places executives at organizations ranging from Fortune 500 companies to non-profit entities. The company is based in suburban Philadelphia

Contact:

Jack Loughran
Buchanan Public Relations
(610) 649-9292
jack@buchananpr.com

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