I Have to Ask You: Terrible, Horrible, No Good, Very Bad Staff Reduction

Posted on September 25, 2017

In this series, guest columnists respond to one of three topics selected by ELGL co-founder Kent Wyatt.

By Matt Horn (WebLinkedInTwitter)

It’s sitting out there, glaring at you.  That ominous, hateful budget summary sheet that shows the bulkiest, most costly, fastest growing expense item in your, as-yet, unbalanced budget.  


Millions and millions of dollars in salaries, associated increases in post-employment benefits and skyrocketing health insurance costs.

Hours upon hours of hedging on revenue forecasts, edging down supply costs, and deferring capital and equipment expenses can’t get you what you can get in two minutes by drawing a red line through one row on the spreadsheet.

Put. The. Pen. Down.

ELGL asked me about the toughest situation I’ve ever faced relative to employees.  The truth is, they are all tough.  Even the good stuff. Raises?  You’ll have to articulate the increased resource allocation to Council and the community, and explain any special circumstances to other team members.  Promotions?   How do you buoy the morale of those not selected?  But, in truth, separation is always the hardest.
Disciplinary separation is almost easier than budget-related layoffs.  At least in a disciplinary case, you know that the employee had full charge of their own destiny and made a bad choice somewhere along the line.  Budget cuts and associated layoffs typically rest solely on the shoulders of key decision makers.  But, at some point in your career, it is bound to happen.  You will have tried everything, and are met with the worst of all decisions.  Here are a few thoughts to keep in mind before, and as you make the ultimate determination:

Never Use Staff Reductions as the Initial Means for Solving a Budget Challenge

In his best-selling work Leaders Eat Last, Simon Sinek posited that headcount management as a means of financial performance is a relatively new phenomenon.  He suggests that the practice of layoffs to meet bottom line targets emerged in the 1980’s.  Prior to that, firms felt more like family operations.  Eddie had kids to support, and Mary was putting her sister through college.  If you cut these folks, the effects would be felt throughout your community.  The short term thinking that emerged in the 1980’s rewarded executives for year over year wins.  Thus, a few layoffs in early December meant big bonuses for CEOs and the like.

In our business, we still impact the community with these decisions.  Moreover, if employees get the sense that they could be next, internal jabbing is most often the selected course.  If I can prove I am better than Eddie, then I can stay. The team takes its eye off the mission, and moves into self-preservation mode.

It’s also critical for organizational leadership to ensure that such cuts won’t wobble you off your path toward your vision. If you save a few bucks, but radically alter your community’s course (in a bad way), you’ve chosen the wrong adventure…

And, dare I say it, when was the last time you looked at your tax rate?  Could it be time for an (gulp) increase (collective gasp, person in the back faints)?

Give the Affected Team Every Opportunity to be Entrepreneurial in Avoiding the Cut

The very best teams move toward intense focus in a crisis.  It’s a great time to give staff leeway and opportunity to get creative about cost structure and service delivery.  Get diverse teams around the table to talk about how we restructure programs, evolve and diversify revenue streams, and demonstrate value for the resources we need to avoid headcount losses.  Remove all of the barriers to creativity.  Everything is on the table.  Hear out all ideas, and give them their due attention.  If the team accepts the challenge, put your entire heart and soul into the exercise.  If they don’t…well…maybe that, in itself, tells you something.

Do Your Best to Identify Exit Opportunities and Make Connections to Support Transition

Local government is a tight network.  Use all of your professional connections to seek out like opportunities in nearby jurisdictions, and even consider similar opportunities in your private sector network.  Write elaborate (truthful) letters of reference, and stay in touch with these folks as often as possible throughout their transition.  Be responsive to reference requests and do everything possible to get your team placed in great positions.

Be Liberal in Exit Compensation

Whenever possible, identify resources to bridge the financial gap for employees making the transition.  Take the most liberal read of your policies, maximize any past practices, and do everything you can to financially support these folks through what is unarguably the most challenging time they will face professionally.  Look to unexpended leave banks, performance incentives, and other payouts that can provide at least some comfort in this horrible situation.  The decision to reduce staff results in a sustained downward shift in your long term cost curve.  Take the initial, one-time hit to cushion this blow for team members who did all they could to support the organization and community.

If you’re one of those managers who is lucky (or smart) enough to get through your career without having to make decisions like this one, congrats!   The simple fact is that most of us will face this at some point.  If and when you do, let empathy and compassion rule the day, and put yourself in their position.  They’ll remember and appreciate your efforts in the long run.


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