PART III - Scaling Down

This article marks the end of a three-article series for tech leaders covering Scaling Up, Optimisation, and Scaling Down.

In case you missed other publications, you can find them here:

• Part I - Scaling Up
• Part II - Optimisation

PART III - Scaling Down

Scaling down, especially due to factors like poor business performance or budget limitations, is a complex and sensitive endeavour. It entails making difficult decisions that affect teams, individuals, and the organisational culture as a whole.

Executing this process is emotionally hard, yet the journey of rebuilding the organisation afterward is equally difficult and demands substantial leadership prowess and discipline.

For a tech leader, scaling down marks one of the most stressful and impactful moments in their career. It's a moment to draw upon life lessons, demonstrating courage, empathy, support and strategic decision-making.

There are a few strategies you need to consider while doing it:

• Communicate, communicate, communicate
• Reshape the operating model
• Knowledge Sharing and Off-boarding
• Talent Retention
• Stakeholders Expectations Management
• Re-thinking Partnerships
• Re-thinking 3rd Party Vendors
• Forgive Yourself

Communicate, communicate, communicate

Although constant communication is a best practice throughout any stage, when planning for a scale-down and making life-altering decisions, it becomes even more critical. This phase can be one of the most stressful and potentially daunting times for many people in your teams. Therefore, it's essential to invest extra time and thoughtful consideration into communication efforts, ensuring that team members receive clear explanations and support.

Here are some essential guidelines to navigate through this challenging period:

- Consider Confidentiality: Be mindful of ongoing decision-making processes and share information thoughtfully. Respect confidentiality where necessary.

- Avoid Panic: While transparency is crucial, avoid creating unnecessary panic. Share information calmly and accurately. If certain details are still uncertain, refrain from speculation and wait for confirmed facts.

- Partner for Planning: Engage key team members in developing a comprehensive communication strategy. Leverage their insights to address common concerns and questions.

- Resist Rumours: Despite the prevalence of rumours, refrain from allowing them to dictate your actions. Focus on proactive communication to dispel misinformation.

- Ensure Clarity and Transparency: Clear and transparent communication is paramount during uncertain times. Provide as much detailed insights as you can to alleviate team anxiety.

- Demonstrate Availability: Show your availability and willingness to listen to team members' concerns, clarify doubts, and provide support. Be prepared to address their questions.

- Maintain Frequent Communication: In times of stress, consistent communication is essential. Keep the lines of communication open, providing updates as soon as new information becomes available.

Most common mistake is to refrain to communicate either by lack of information or fear to break confidentiality.

Reshape the operating model

A significant scale-down means transitioning to a completely new organisation. 

This requires a comprehensive reevaluation of all aspects previously established during the scaling-up phase. Structural changes, including team composition and leadership roles, must be carefully considered, as well as adaptations to workflow and processes to maintain efficiency with fewer resources.

This period is likely to be emotionally challenging, as it may involve letting go of valued team members and disrupting established relationships. While acknowledging the difficulty of these decisions, it's crucial to prioritise the organisation’s operational model and the skills necessary for future success by optimising the remaining workforce's capabilities.

When reshaping the organisation, it's crucial to consider various aspects:

- Business Changes: Evaluate how changes in the business landscape will impact your scope of work. Identify critical areas that cannot be compromised and manage expectations regarding fluctuations in service and operations for less critical aspects.

- Maintenance and Support Levels: Assess the actual effort required for maintenance and support tasks. Determine the level of disruption that can be gracefully managed and adjust service levels accordingly to accommodate changes.

- Team Composition: Review the composition of your teams and identify key members capable of handling cross-functional responsibilities. Make tough decisions about which team members should stay and who may need to leave the organisation, considering all levels from leadership to junior roles.

- Interdepartmental Relationships: Analyse changes in other departments and how they will affect your team's working mode. Ensure alignment between departments and consider how your reshaping efforts will impact their operations.

Knowledge Sharing & Off-boarding

Prioritising knowledge sharing practices should have been established well in advance, but it's common for them to become outdated or underutilised over time. Therefore, it's critical to assess their current state.

Identifying who holds essential knowledge within the organisation and at what level it resides is paramount. Understanding expertise across teams and departments helps determine potential knowledge gaps.

Accept you will have knowledge loss with the scale-down, however, before deciding on staffing changes, recognise the risks involved and their impacts. Losing key personnel can lead to a loss of critical knowledge, disrupt workflows, and impact project timelines and deliverables.

Preparations must be made for the off-boarding of those unfortunately leaving the organisation. This includes documenting their knowledge, arranging knowledge transfer sessions, and ensuring smooth transitions for ongoing delivery.

Consider the following approach:

- Map Product and Service Flows: Analyse your product and service flows to identify individuals within your organisation who possess critical knowledge. Determine the depth and breadth of their expertise across different levels and departments.

- Leverage Historical Data: Utilize historical information on past incidents or complex situations that required specialised skills to resolve. Identify and retain the individuals or teams that successfully handled these scenarios.

- Establish Off-boarding Criteria: Develop clear criteria for off-boarding individuals or teams affected by the scale-down. Consider factors such as the importance of their knowledge to ongoing operations, redundancy within the organisation, and the potential impact of their departure.

Talent Retention

Talent retention becomes immensely challenging during the process of scaling down and in its aftermath. Deliberately reducing talent can have profound effects on teams, relationships, and overall work dynamics.

The impact on those who remain cannot be understated; many may experience long-term emotional distress. Some may ultimately choose to leave the organisation due to feelings of frustration, diminished morale, and a sense of being undervalued.

Here are some possible approaches:

- Select Strong Leaders: Prioritise appointing resilient and inspiring leaders who can provide stability and reassurance to the remaining team members. Whether emerging from within the teams or previous leadership, effective leadership is crucial for instilling confidence in the team's future prospects. Belief in the organisation’s trajectory significantly influences talent retention, making the presence of adept leaders paramount.

- Maintain Open Communication: Sustain a continuous flow of transparent, factual, and honest communication to keep everyone informed about decision-making processes, impacts, and the envisioned path forward. Over-communication, if necessary, fosters engagement and alleviates uncertainties.

- Collaborate with People Partners: Collaborate closely with people team members who possess insights into team dynamics and can offer support in communication strategies or addressing specific concerns. Leveraging their expertise can facilitate smoother transitions and bolster morale.

- Be Available and Listen: Create an environment where team members feel comfortable expressing their opinions, concerns, and perspectives. Actively listening to their feedback fosters trust, strengthens relationships, and encourages a sense of solidarity during challenging times.

- Empower Your Team: Recognise that you cannot make all decisions alone. Empower your team by providing guidelines and frameworks while granting them autonomy to contribute to decision-making processes. Encourage their input and involvement, as they are ultimately responsible for executing tasks and delivering outcomes. However, maintain accountability for final decisions to ensure coherence and alignment with organisational goals.

Taking a potentially controversial stance, it's noteworthy that I don't solely emphasise "Money". While offering higher compensation can indeed retain talent, it's not a sustainable solution, especially during times of scaling down and diminished morale. Instead, prioritising fair compensation should be an ongoing practice throughout your team's professional journey. Team members recognise this approach's merit, understanding that compensation alone won't address underlying issues. They may stay temporarily, but ultimately seek environments that offer respect, prioritisation of mental health, and job security. Therefore, resorting to monetary incentives serves as a short-term fix, postponing rather than resolving long-term challenges. Nonetheless, it's essential to assess your circumstances thoroughly and make the most appropriate decision.

Stakeholders Expectation Management

When experiencing hyper growth, managing expectations may seem straightforward as you swiftly hire talent to meet business demands. However, during the optimisation phase, the zero-growth mindset already places some emphasis on careful decision-making. Yet, it's during the scaling-down phase that stakeholder management skills become paramount. With the anticipation of decreased tech capacity, both delivery and service levels will be impacted. 

Here are some strategies to navigate this transition effectively:

• Clarify predictable impacts: Communicate the ramifications of reduced capacity, emphasising the need for a simplified roadmap and heightened prioritisation.
• Leverage existing resources: Ensure stakeholders are aware of existing products or services that can fulfil their needs. Encourage a mindset of maximising current capabilities rather than seeking new solutions.
• Prioritise rigorously: Emphasise the importance of selecting initiatives that truly drive progress. With limited capacity, it's crucial to focus on endeavours that have a significant impact.
• Exercise discretion in saying "no": Avoid initiating projects solely to compensate for inefficiencies in other departments. Instead, prioritise efficiency and effectiveness.
• Engage stakeholders in decision-making: Foster transparency and involve stakeholders in discussions about alternatives to their requests. Clear communication fosters informed decision-making and alignment.

Re-Thinking Partnerships

When facing a substantial scale-down that entails letting go of valuable company team members, you know you need to reevaluate partnerships. Careful management is essential to navigate the resulting tensions. 

Here's a suggested approach:

• Assess the new scope: Identify the specific skill sets required under the revised scope and adjust partnership requirements accordingly.
• Discuss contract impacts: Engage in open discussions with partner companies to negotiate necessary adjustments to existing contracts in light of the scale-down.
• Provide transition time: Offer partners sufficient notice and time to arrange alternative solutions and communicate any changes to their teams or stakeholders.
• Adapt organisational structure: Modify your organisation’s structure to align with the revised scope and partnership arrangements, ensuring efficiency and effectiveness in the scaled-down operation.

Re-Thinking 3rd Party Vendors

In a manner akin to managing partnerships, it's necessary to streamline contract costs with third-party vendors when undergoing a scale-down. 

Here's a possible approach:

• Reassess needs: Review your requirements in light of the scaled-down operation, identifying areas where cost reductions can be made without compromising essential services.
• Review agreements: Scrutinise existing contracts with third-party vendors to identify opportunities for renegotiation or termination.
• Renegotiate terms: Engage in discussions with vendors to renegotiate terms, seeking better conditions or adjusting scope to align with reduced needs.
• Simplify vendor base: Consolidate your vendor base by terminating agreements with redundant or nonessential suppliers, focusing on maintaining relationships with those that provide the most value.
• Consider contract extensions: Evaluate whether extending specific contracts under revised terms could be advantageous, securing better conditions or ensuring continuity of critical services.

Forgive Yourself

Scaling down can be an incredibly challenging experience for any tech leader. You may face moral conflicts, tough decisions, broken relationships, anxiety, and stress. Pressure can come from all directions: senior leaders, stakeholders, and even friends. Despite these challenges, you are accountable for the decisions and actions taken during the process. It's crucial to maintain a sense of direction and purpose, even in the face of adversity.

Resilience, determination, belief, and empathy are essential qualities to embrace during challenging times like scaling down. However, perhaps the most important and often overlooked quality is the ability to forgive yourself.

Remember, you are human among other human beings. Mistakes are inevitable; accept them. Tears may fall; allow yourself to feel. Sleepless nights will come; embrace them as part of the journey. Your team relies on you to make the best decisions possible and move forward. Dwelling on the past serves no purpose. Instead, focus on adapting day by day, knowing you're doing everything in your power to navigate through and create a path forward for the remaining team and the organisation.

You are only human. Forgive yourself. Move along.

What follows next?

After enduring the challenges of scaling down, there's a pivotal question that demands our attention: How do we rebuild the culture, regain trust, and sustain morale?

Trust, the cornerstone of any thriving culture, blossoms through transparent, regular communication and a clear rationale behind decision-making processes.

Morale flourishes under the guidance of strong leadership, exemplified by leading through actions, demonstrating empathy, and providing unwavering support.

As these elements intertwine, they breathe life back into the organisational culture. However, this journey won't be easy; it will demand resilience and commitment. Brace yourself for the road ahead.

Ultimately, avoiding a scale-down scenario requires a multifaceted approach rooted in strategic planning, innovation, and responsible resource management. Sustainable growth hinges on these factors, emphasising the importance of prudent decision-making and risk assessment. By exercising common sense and refraining from overextending your business beyond its capabilities, you can foster a stable and resilient trajectory. Accountability and responsible growth practices are paramount in safeguarding your team’s longevity and success.

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With this, I bring the article series to a close.

I trust it has provided valuable insights into the intricate themes of scaling up, optimising, and scaling down, drawing from firsthand experiences navigating these processes.

Take care,

Helder