I have been involved in serious cost cutting and downsizing activity throughout my career. Every instance has been traumatic, and there have been mixed results.

However, there have been some common themes:

• Invariably, the program is driven by revenue decline, is commenced too late and is rushed.

• True reengineering is rarely even attempted due to an urgent need.

• ‘You don’t know what you’ve got ‘til it’s gone’ (with apology to Joni Mitchell). A person’s contribution is never consistent with their position description.

• For the sake of fairness, percentage cuts across all departments are demanded.  This makes no sense.

• The program is used to weed out under-performers who have not been addressed with performance management.

• The costs usually creep back into the business, and you are back where you started.

U.S. research has shown that less than 50% of businesses delivered a better bottom line within two years of a restructuring program. The devastating impact is not only felt by exiting staff but also the “lucky” ones who survived the cull. Will they be next? Many don’t deal with the trauma of a ruthless process and either leave or shut off.

Of course, reengineering and restructuring are very different beasts. My experience is that true reengineering has been effective, albeit the savings have sometimes been incremental – system fixes, addressing process disconnects, identifying skill deficiencies and training needs. Significant improvements only come with skilled help and a lot of work.

Executives often see downsizing as a test of leadership that proves that they can take the tough decisions. The true test of leadership is understanding the root causes of your problem and dealing with them early and effectively.

Effective downsizing takes serious planning and smart decision making. Reengineering is even more complex and difficult and should be addressed well before problems set in.

References: ‘Sacred Cows Make the Best Burgers” by Robert Kriegel & David Brandt – Harper Business Books

Author: Bernie Bicknell and Co-Author: Stuart Diggins; Partners nem Australasia

This article is based on research and opinion available in the public domain.