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Did someone say “dumbsizing”?

Attracting, retaining and using the best people is vital, but sometimes the
realities of the business and economic cycle mean that the headcount
needs to be reduced. I am not thinking only of the so-called “packages”
when I suggest that downsizing carries with it major and irrecoverable
costs. Careful assessment of the results of companies that have been ruth-
less in “cutting heads” has shown that very seldom do they return to the
profit levels of others in their sector that found different ways to reduce
costs when necessary and survive. Forget the extreme cases, ignore the
tales of hatchet men who have been accused of the “eighteen month good-
bye” and, in one case at least, of false accounting. Getting downsizing
right is a difficult and expensive process. Before embarking on a down-
sizing exercise it is essential to obtain reliable answers to the following
questions.

n Is downsizing the only way to survive in today’s economic
environment?

n What is your evidence?

n What other ways have been considered?

n What has been rejected?

n Why?

n Are those who are promoting the idea of downsizing aware of the
downside?

Let us look at the downside and the reasons why downsizing rarely is
the path to prosperity that it is sometimes touted as being. Downsizing
carries within it the seeds of two, often fatal, business diseases.

Corporate Alzheimer’s

This is the name that has been given to one disease. It strikes when essen-
tial, but unrecorded knowledge walks away in the minds of those who, with
the best of intentions, assumed that “everybody knows that”. Too often,
knowledge that has become the foundation of action that has become
habitual is regarded as too obvious to be either recorded or communicated
and when those who know it leave, it leaves with them to return only when
disaster strikes and someone has the nous to find out what went wrong. A
simple example is that of an experienced salesperson who knows better
than to call on a certain important customer on Monday, because his foul
mood after a weekend incarcerated with a wife whom he hates leads him
to cancel orders rather than place them. A new salesperson without that
knowledge which everybody is assumed to know walks blithely in on
Monday and loses a critical order and possibly an important account. The
example, in the interests of keeping it simple, may seem trivial, but the
cumulative effect of all the key pieces of information that can be lost is not.

58 Key management questions