Oprah and Me

By Eugene Reagan
Senior Consultant

One night last week, I dreamt I was on “Oprah.” No lie; I’m not making this up. Apparently, I was some kind of management consultant guru because Oprah wanted my opinion on a wide range of business topics. However, since it was a dream, I can remember only one: Oprah wanted to talk about mass layoffs. I told her they are the result of massive management failures that are seldom acknowledged or publicized.

When you read about a company reducing its workforce by 10 to 20 percent or more, it is usually the result of a series of management miscalculations. Occasionally, a company is cutting its losses—eliminating expenses related to business that is bringing in little or no commensurate revenue. But, many times, an organization is just trying to do more with less. It is recognizing that its expense structure is not allowing it to generate sufficient profit. In that case, the reduction is an admission that management 1) did a poor job of managing expenses, or 2) cannot price or market the product properly.

If a company has allowed its salary expense structure to get out of line in relation to its profit model, it is either generally overstaffed or top-heavy in management. Let’s be clear: If a company is properly staffed, large reductions in staff will negatively impact service and/or quality. Ultimately, that negative impact will show itself on the bottom line.

Across-the-board staff cuts can lead to the loss of the employees that a company can least afford to lose. Even targeted cuts can fail to retain the high performers, unless they are clearly identified by effective measures. Accurate performance measures that drive staffing models can determine the impact of staffing changes. It is one thing to reduce staff when the volume of work is falling; it is something else to reduce staff in the face of constant or growing volumes if the real work remains. In the latter instance, backlogs, poor quality, and unsatisfied customers are almost guaranteed.