Posted on 27 August 2009.
We’ve all heard the term rightsizing, and the mere mention of the word serves as the catalyst for a room full of eyes to roll towards the heavens. Groan. Here we go again.
In this era of layoffs, restructures, downsizing (or should I say rightsizing), corporates have tended to grab the opportunity to reduce the cost of employing people with a flourish. And it’s easy to see why.
Inside the hallowed walls of your average corporation, more than half the people employed never ever deal with a customer. Compare that to a small business where 75% of employees are dealing with customers – and it doesn’t take Einstein to see it’s easy pickings for a corporate to target its human cost base.
And, in an era where quarterly results matter, and stock markets will whack your business hard if the numbers aren’t right, so there is plenty of incentive for senior management to look at ways to actively reduce costs. And often employees represent a large proportion of the cost.
So why then are there more downsides than upsides when it comes to restructuring.
Because a headcount reduction – in the absence of a program of work that looks to streamline business process (and this program of work needs to be initiated before the restructure and almost never is) – is one of the dumbest things for a business to do and yet smart well-paid executives keep on doing it. But you cannot reasonably expect fewer employees to do the same amount of work – instead you can reasonably expect a substantial impact on productivity and morale, and the increasing engagement of contractors to help bridge the gap in delivery left by the departure of employees. SO you might shift costs across budgets – but you ain’t shifting them out.
So before you slash and burn your headcount:
- Put in place a program of reengineering processes and streamlining them.
- Remove duplication of effort
- Dismantle bureaucracies
- Reduce cycle times
“Any company that is more successful at restructuring than reengineering will find itself getting smaller faster than it is getting better,” Hamel and Prahalad, authors of Competing for the Future, told us back in 1994. Words that still ring true today.
If you don’t pursue growth and new market opportunities with the same zest you apply to rightsizing your organisation and creating operational efficiency, you will die by the numbers you live for. And you may fatally risk the health of your entire business in the process.
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