Thursday, July 12, 2012


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QThe industry segment our Association represents has been hit by massive market changes. We are struggling to stay alive, but dont want to cut staff. We are cutting expenses, freezing salaries, leaving vacated positions vacated. We have gone to flextime schedules, pizza lunches and closing at PM on Fridays to keep morale and productivity up. What are some other things we can do?

- Association President.

A Dear Association President

Surveys and experience over the last 0 years indicate that downsizings usually decrease morale and productivity and can potentially cost firms more than they save. Costs may include severance and benefit payouts, outsourcing requirements, corporate consultants and, in some cases, rehiring employees who were laid-off to perform critical tasks.

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Smart companies and organizations have taken heed; many are employing ways to avoid or minimize the trauma and disruption caused by reductions-in-force and reorganizations that are euphemisms for downsizing.

Perhaps the most important single thing that can be done before cutting is to get focused and creative about restoring or increasing revenues. Organizations that focus primarily on reducing expenses often have to do it more than once with disastrous results to corporate culture, morale, productivity and effectiveness.

In his classic article, The Right Way to Downsize the Government, Peter Drucker says the right approach is to first focus on things the organization does well, things that produce desired results for the organizations publics and customers, then invest more - not less - in those areas more money, more people, more effort, more thought. Then, says Drucker, look at all the other functions and decide whether you need them at all (dont just cut everything across the board 10 or 15%.) (See this column The Right Way to Downsize in the April 1 issue of Executive Update

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