No owner wants to consider business downsizing, but it’s occasionally necessary to protect the company’s longevity. Even the most successful organizations can have a rough year. The important thing is to handle the tough times correctly so that you can come out stronger on the other side.

Signs That Your Company Is in Trouble

Looking at the headlines and jumping to the worst-case scenario in economic instability is straightforward. If you’re experiencing a downward trend in your business, look at your metrics and ask yourself a series of questions:

• Are the circumstances of this downturn like something you’ve seen before? Why or why not?
• Are other companies in your industry in a similar position?
• Are there factors on the horizon that might improve your circumstances, or will things likely worsen?

If the outlook is grim, business downsizing might be your best option.

How to Downsize a Company

It’s important to note that downsizing shouldn’t begin or end with layoffs. Business downsizing must also include expense reduction, inventory control, tighter cash management, overtime restrictions, improved efficiency, duplication reduction, assortment rationalization, deal buying inventory, outsourcing, and anything else that can impact your bottom line.

Before cutting staff, ask yourself: Are there other opportunities to increase revenue you’re overlooking? Are there obvious areas where you can tighten up cash flow and reallocate resources? How can you improve efficiency with the staff you currently have?

If you’ve done everything possible to reduce costs and are still in a bind, layoffs might be the best option. It’s challenging to decide which employees should go and which should stay. Here are a few employee downsizing factors to consider:

• Who has been with the company the longest, and who has just recently joined?
• Talent scarcity. Who will be the hardest to replace down the line?
• Who is likely to leave on their own?
• Pay scale. Who is making the most money? The least?
• Are there employees who have been performing below their optimal level?

Once you’ve decided who to cut, here are some steps to take to make the employee downsizing process as easy as possible:

1. Communicate with your department heads. Too often, managers are the last to know when their team members are let go. They need to understand the reasoning behind your decision and eventually be on board.
2. Make a plan for the remaining employees. Who will take over the responsibilities of the employees who are leaving? Before letting anyone go, you need a game plan for the job duties of the remaining employees, including retraining and cross-training.
3. Offer a smooth transition for outgoing employees. Make the following steps as straightforward as possible. Provide any resources they might need, such as how to roll over their 401k and opt into COBRA if required. Offer positive references when appropriate.
4. Maintain employee satisfaction. Layoffs kill morale and create a feeling of instability. Be patient and understanding as your remaining staff adjust to new responsibilities, and make sure they feel appreciated.
5. Maintain customer relationships. Your level of customer service should remain the same, no matter who is let go. Continue creating a seamless experience for your customers so they don’t get skittish.

Downsizing your business requires a carefully devised tactical plan. A business coach can help. You can click here to schedule a complimentary coaching session to think through your approach.

Coach Dave