Deep Cuts: Have you Restructured Enough?

Is it time to make deep cuts

There is a saying in the turnaround world that when you cut staff, cut deep and deeper than you think – but only make the cuts once. This approach helps reinforce the morale of the remaining team members, reassuring them that no additional cuts are expected.  I’ve worked with turnarounds for 20+ years and almost every time, we didn’t cut deep enough.  There was always a rationalization as to why we need to keep this person or that person. In the end though, the majority of the time, we wish we’d made the deeper cuts, difficult as they would have been.

With the crazy 2020 economy, all of my clients have restructured in some way.   Business as we knew it changed, and we are all doing things differently than we did a year ago.

But now as we move into the new year, we need to ask the question, “Have we restructured enough?”  When advising clients, I recommend they think from the viewpoint: “If we started this company today, what would we want it to look like?”  Most admit they would want a leaner and stronger team.  Often, there’s a “Sally” who has been there for years but didn’t adapt as the company grew and remains difficult to work with.  Or a “Bob” who was enthusiastic when the company began, but has settled in and coasted for too long now.

My clients often would not have the same systems and processes, either. It’s natural for these to evolve over time. If they don’t, that’s actually concerning. While you don’t have to jump on the latest technology crazes or change a smooth operations procedure frequently, you could be missing out on productivity if you don’t at least stay aware of how you can adapt and take advantage of new tools and ideas.

Now is the time to take a look at staffing, process, and systems, with the new year coming quickly.  If you don’t, you may experience what a business-owner friend did.

He tried to keep things the way they were.  Their business was significantly impacted by the C-19 virus.  He had trouble facing reality.  He told himself, “Things will come back. I want to keep Bob and Jean, I’ll need them.”  He bled through all the excess cash on payroll and rent.  When his cash started to run out he called me.

We looked at his business as if it was a brand new start-up.  Would he need Bob and Jean if he was starting the business today? It was a definite “no.”  He also wouldn’t need his beautiful, but now 3/4 empty office.  He could do 100% remote if necessary.  He was focusing 100% of his time on worry and expense reduction rather than 90% of his time on revenue generation and strengthening his team—key roles for the CEO of a small business.

To be fair, these considerations aren’t easy.  And to his credit, he did the following:

  • He started to work within the 80/20 principle, giving 80% of his effort to the top 20% of priorities for the company.
  • He adopted the 13-Week Cash flow process, and stopped the cash bleed.
  • He gave serious consideration to his business plans and budgets for 2021, even if some decisions wouldn’t be easy.

Things still aren’t perfect for him, but his business is surviving. And these days, a surviving business can almost be considered a thriving one.

How about you? Do you need to make some deep cuts? Do some hard thinking? Make some significant changes? It’s not easy, but being a business owner often isn’t. There are ways to handle these decisions with grace and helping your people adapt or even find new places to spread their wings if your company isn’t the best fit for them anymore. You all may find you come out of this global difficulty a little stronger and better positioned for the future.  Let me know if I can help.