Downsizing Gracefully: If, When & How To Lean Out

Is it existential? Or is it just stressful?

Downsizing, pivoting, “going in a different direction” - these are not rash decisions to make when it comes to your business.

This storm of high-profile layoffs we are weathering, in tech and beyond, might seem impulsive, careless, random…and some might very well be.

For others it’s hard to say without inside intel, and even with transparency often the din of upset and resentment is louder than any strategy behind the scenes.

But a slew of factors - the economy as a whole, for one - mold an organization’s need to pivot: present or forecasted, acute or holistic, and existential or temporary.

Understanding them in your own business can save you a lot of grief.

The sequence of triaging when entertaining options for (seemingly) apocalyptic circumstances are:

If to, when to, and how to “lean out.”

I’ve had to do it before, I’m assessing it now, and surely I’ll face the music again.

Here’s a guide for “if, when and how to lean out” of operations in your business:

1. Audit Your Business: This is the central mandate: identify the root problems of running it.  It could be profitability, but another metric or flag for leaning out is employee morale. Is it employee baggage, from accepting a lower level of scrutiny in hiring? Is it a training problem? Did you scale too quickly?
2. Red Flags: If problems are operational, or employee-related - you need to scale down to fix them. If you don’t have trust in your employees, it’s time to cut back.
3. Alternative Action: Upon thorough assessment, do you just need to augment processes, increase efficiencies, reorganize, lean IN or even scale UP? Do you have the necessary trust in your employees to make these changes, or is there a fundamental problem there?
4. ID What’s Salvageable: If downsizing is necessary, decide what, if anything is worth saving - and if it can be done without impacting current levels of service, clients and other stakeholders
5. Plug-Pulling Execution: Be strategic, have a plan, but immediately start instituting changes. Don’t wait until the plane runs out of fuel, but don’t go nose down SkyKing style either.
6. Pick Yourself Back Up: When you rebuild, focus on hiring and vetting people above all else. Employ a high level of scrutiny this time around when it comes to employing a team to reset. And, make sure your new processes reflect what you’ve learned.

Being thorough and thoughtful are the underpinnings when it comes to this perceived “worst-case-scenario.”  Making decisions and moving too fast is enticing, it feels on brand, it fits with the hustle culture -but it can directly cause the anguish you fear the most.

It’s not the end of the world, actually, and even if you must downsize…there’s a right way to do it.

1. Audit Your Business

Downsizing a business can be reactive, or proactive. Reactive is generally accompanied by a sense of panic, rash decisions, resentment, collateral damage and other fallout.

Proactive is more strategic (though collateral damage might be inevitable, planning can soften the blow).

Downsizing can help overcome:

• Financial instability that compromises long-term viability
• Predicted extended decrease in demand for products/services
• Operational inefficiencies
• Recessionary problems

Whatever the case may be, you must GET A GRIP. When things are uncertain, emotions are zinging. You need to get a grip on your nerves, but also…

A grip on what’s actually happening.

Get A Grip

In the heat of a perceived existential problem, the general sentiment is ANXIETY. It’s easy to jump the gun, start pulling levers, plugs and (no) punches. To reduce overhead by:

• Downsizing operations - cut products or services
• Selling assets
• Laying off workforce
• Offloading clients

But none of these decisions will guarantee coming out stronger on the other side, especially if you are hasty. In these times, the risk of misunderstanding, misattributing, and throwing the baby out with the bathwater is lofty.

You must take a beat.

Resist the impulse to be rash, and truly investigate the factors at play - meaning, audit your business. Inform yourself before you decide to fix them, do damage control, or take the L.

All Hands On Deck

Downsizing CAN be an effective way to save money. It CAN be a clean slate to restructure and refocus based on changing needs. But it also can royally screw the whole operation and everyone involved.

The central mandate when in crisis mode is to scrutinize your business and find the root problems, or the slack. This is an all-hands mission.

All departments, all contractors and teams should be involved to discover the facts of the weak or broken systems, without blame or judgment. This is a team project with a very hard deadline.

First find the WHAT, and then swiftly move into the WHY. Threatening holistic issues can include:

• Profitability
• Financing hurdles
• Faulty infrastructure or business model
• Inadequate management team
• Employee baggage
• Employee morale
• Training problems
• Operational inefficiencies

Only then can you assess HOW to handle them, and WHERE to focus. Once information is gathered, ask yourself these questions:

Are you operating outside of your financial capability? 

Would continuing at your current pace be the reason you close your doors for good?

OR…

Are there alternatives? 

Is it existential, or is it stressful?

2. Trust Or Bust: Evaluating Red Flags

They say downsizing and layoffs aren’t personal. Companies point to the economy, the industry, demand, and viability-threatening financial instability…

The general sentiment is that it’s in “the company’s best interest,” not the fault of employees. Yes, the typical - or at least public reasons - for downsizing are in fact, not personal.

But as a business owner facing these hard decisions right now…I disagree. Sometimes, it is personal.

I do not mean to attack anyone, or be insensitive to those who find this all-too-relevant topic close to home. I’m just here to suggest that sometimes, a reason to “lean out” is none of those above…

It’s employees that break trust.

Hindsight is 20/20

This is one of those hindsight issues. It could have been prevented - but it’s too late now. Trust is really hard to regain. And those individuals are the last people you’d trust to fix your business in a do-or-die, existential scenario, because they were part and parcel of the problem to begin with.

Inherently, they aren’t the solution. But let’s step back to the could have been part. This is where the “accountability” actually traces back to YOU, and to the hiring process.

So when I said before that it can be personal - I meant the burden is technically also on YOU.

The 20/20 experience - at least for me - started with realizing I was approaching the screening process all wrong. I didn’t vet people adequately. What can I say, I like to move fast! I meet one stellar candidate I’m excited about, and wanna get groovin’.

But my naive process led to employees that:

• I can’t trust to lead, communicate or be consistent
• Aren’t coachable
• Continuously let personal life negatively impact work
• Are mindless and did a good job - but not great

I realize now that a higher level of scrutiny would have avoided the later existential problem. I’m not talking about experience, accolades, or even skills. I’m talking about markers of trust: if they’re coachable, they listen, and if they actually CARE.

Shifting Strategy: The Trust Matrix

My new, more strategic approach to screening for a role involves asking them granular questions about: 

• Their plan, and how they’ll execute it towards reaching company goals
• How they’ll track results
• How they’ll hold themselves accountable
• How they’ll report to the team - so the team can then hold them accountable

…And then, interviewing 5 more candidates - even if I like what I hear.

Selecting high-performers is not the endgame - even high-performing people need to be focused. They need to listen to you, as their leader, on how to leverage and hone their time without distractions.

Without trust in that, performance doesn’t matter.

There’s a performance-to-trust matrix I think of here:

• High performing, low trust (-)
• High performing, high trust (++)
• Medium performing, medium trust (+)
• Low performing, low trust (--)
• Low performing, high trust (-)

This graphic shows this matrix visually:

The whole top right quadrant = bueno

The entirety of the two bottom quadrants = no bueno

And the top left quadrant varies.

Takeaway: it’s better to have medium performance and positive trust than high performance and negative trust.

The hiring process is ineffably consequential. It is where you build trust, and find trust. No matter if you are profitable, a company built on pseudo-trust, or naive trust, is a house of cards.

You need to be able to trust your team because inevitably, you’ll face crises, and whether they’re existential or just stressful, you won’t make it if you can’t.

3. Alternative Actions to Downsizing

You were about to jump the gun, make the rash decision to downsize. You panicked, understandably - it feels existential even when it isn’t sometimes.

But, you’ve thoroughly audited your business, from all angles. You have your arms around the state of your company and sussed out potential red flags.

Some of it might have been brutal, or at least sensitive - especially when it comes to assessing your employees, and your hiring process choices. But after all, it could turn out that it’s not your worst case scenario.

It could have been blown out of proportion, but you wouldn’t have known it without your deep inspection. After all, you might just need to make some other, non-layoff adjustments.

If this is your perception, it doesn’t mean things can stay the same. The situation still begs for action, and change, or you very well might eventually collapse anyways.

Alternative actions can be taken to save the good you have going on. 

Is it just a matter of:

• Augmenting processes?
• Adding more support and scaling UP?
• Shifting investments?
• Increasing efficiencies?
• Reorganizing workload and priorities?

You’ll know the answer, but I implore you to ask yourself one overarching question and get real about it. Reflect harder on your workforce analysis:

Do you have the necessary trust in your employees to make these changes, fix these issues?

If the answer is no, then none of those alternative actions will succeed. I’ll say it again: trusting your employees is paramount to maintaining or salvaging a business.

For the sake of this topic, let’s assume your answer is “no.” How do you proceed, now that you know you have to downsize?

4. ID What’s Salvageable

If downsizing is necessary, decide what is worth saving. Some examples may be:

• Client load: Number of retainers, as well as depth and breadth of each current client service
• New or in progress projects
• Ongoing, stable maintenance client work
• New hires that haven’t messed up, but were hired under the same problematic processes as those who caused the issues
• Reliable contractors, VAs, etc. you’ve been working with
• Future travel or event plans
• Marketing budget
• Office space
• Product portfolio
• Bonus structure and payroll levels

Consider how what you salvage could impact your clients - can it be done without impacting current levels of service? Current levels of value to stakeholders? To the employees you DO trust, and want to keep?

You have to audit and triage another round with this lens. This is a core part of having a plan.

5. Plug Pulling Execution

Knowing exactly what you’re trimming is part one. Executing and rollout is part two.

Internal rollout comes first. Delicate, sensitive communication is vital to a successful and peaceful lean-out. When it comes to layoffs, don’t drag it out - it will only hurt morale more and spike anxiety levels of everyone (including those you want to keep). People can see the signs - so act swiftly and respectfully.

• Don’t spill the beans to others before each affected individual is informed. 
• Have your script ready. How will you explain it? How will you help them move forward?
• Have your procedure. Are you laying off, or furloughing? How much notice will you give them? What type of landing pad can you offer? How will you handle delicate documents, NDAs, severence, etc.

Next comes external rollout. Depending on your public profile, you may or may not need to prepare a plan. If you run a company that’s high-profile, you certainly need it.

• What outlets do you want to engage? How will you vet them?
• What public messaging will you share through your channels? Know your position and reasoning, and keep it consistent
• Don’t drag it out publicly either. Be intentional and prompt

You also need to have a gameplan for what and who’s left. 

• Double down on what’s working: Be it your biggest clients, your most successful projects, your highest ROI products. Have a plan for polishing the gems you saw fit to save.
• Take action on restructuring: If there’s changes in workspace, retiring product lines, changing incentive and bonus structures, budget, or employee roles - tackle the low hanging fruit and don’t stop there. Reset the stage for what to expect moving forward.
• Prioritize remaining employee morale: how do you balance transparency and uncertainty, in order to reassure and empower those still left? How do you communicate most effectively and efficiently the changes that are happening? 

You don’t want to wait until you crash and burn to start your recovery plan. You have to balance being strategic with timely - and that comes from your thorough understanding of the problems.

6. Pick Yourself Back Up - Back To Square One

After you execute your downsize - whatever capacity that looks like - you get to rebuild. You get to take what you preserved (a hopefully solid framework), and build upon it. But only once you have stabilized it.

Your rebuild starts with revamping your hiring process: the likely root of your problems. You need to reexamine, study even, how you will vet new hires, and what criteria you’ll hold them to. Your level of scrutiny needs refinement, but also the logistics.

I highly advise companies at this stage to seek consulting from and Industrial Organizational Psychologist - the scientists behind HR.

They’ll help you thoroughly reconstruct your entire hiring funnel:

1. Establish your job descriptions (internally): Know what you need. Flesh out specifically what tasks and expectations are for each opening. Know how they will be evaluated, how they will be managed, who they will report to, and  the resources and access they will need. How much will you pay them? What is their benefits package? 
2. Establish your ideal candidates - for your culture, and per each job description - ahead of time: Reflect on what didn’t work, and essentially create an ICP for each job. Treat this as a science. 
3. Update your TOF hiring collateral: redesign your job listings to mirror your job descriptions but sell it. Design it to attract the right people, centering your new standards and what matters to your prospects.
4. Update your application process: Decide where to advertise your listing. Decide what to include - what questions do you want to ask? Do you want to include any questionnaires, surveys or tests that make sense? Who will be receiving and vetting these applications? What is the messaging each candidate will get?
5. Update your interview funnel: For those candidates that seem like a good fit, how do you guide them through a positive experience while also assessing fit adequately? How many interviews do you need, and what will the format be for each? What are you looking for in your candidate to ensure you can trust them? Have your standardized plan in place.
6. Update your offer process: when you whittle down your winner, how will you present your offer? How will you notify those candidates that didn’t pass? Will you require your hopeful new hire to take any additional steps before onboarding (i.e. drug screening, reference checks)? Will you have the offer presented in person, verbally on the phone, or via email? How will you handle counter offers? 
7. Realign your onboarding: Do you HAVE an onboarding/training protocol? You better. Red flag #1 from the new hire’s perspective is stepping in, flailing with no sense of how to begin and hit the ground running. Do you have the resources and people in place to get them up to speed?
8. Get to know your new employee: Integrate dedicated time to really get to know the new hire and build rapport early on. Find out what motivates them, and really listen to that. Build your incentive structure according to each role.

Employee Retention

This is a good start, but measuring an effective hire doesn’t stop there. Maintaining them is equally important.

Follow I/O principles for sustaining motivation, measuring results, and providing constructive feedback - and not just quarterly. Have the infrastructure in place for consistency in all of these realms. Open the space for trust by providing support on an open-door basis.

Overall, there’s a lot of logistics, thought and energy here. But the bottom line of it all is that your new processes reflect what you’ve learned, from hiring to promoting.

Round Up

Downsizing isn’t a cozy process. Even if it isn’t for existential reasons, it’s stressful, it’s sensitive, and how you go about will be consequential to the future of your company. 

Knowing what’s actually going on, knowing what the critical camel-back-breaking straws are, how to approach salvaging, how to pull the plug and how to pick yourself up by your bootstraps and move forward is the only way to approach it - not being rash. Not making assumptions. Not seeing through rose colored glasses or being naive.

If you are thoughtful and considerate of these circumstances, you’ll come out of it for the better. Just know, it’s not the end of the world!

#hiring #downsizing