The Hindu Business Line : When downsizing looms

It has been a horrendous few months for four of my friends who run a successful company they founded eight years ago. As the company grew, a time came when the senior management team grew more confident of the future and rightfully started investing in people and physical infrastructure to cope with the growth. The high tide seemed to be in and seemed set to stay that way for a while.

As often happens, the storm hit the company with unanticipated ferocity. A couple of big customers decided to move away to a competitor and the world suddenly looked a very different place. Intense efforts were made to get the customers back, but these failed. Since people represented a major chunk of costs, the situation could not be managed for more than a few months if new avenues of revenue did not open up. Unfortunately, efforts at winning new customers also did not yield immediate results. The choice was stark — either let some people go or face serious financial trouble.

My friends went through a traumatic period when they gradually shifted from being angry with the customer, denying reality and then deep depression. The years of passion and commitment seemed destined for the junk heap. It was then that one of them actually faced up to the need for letting some people go.

Making the decision

They had emotionally-charged meetings and the crisis came when one of them decided to part ways if people were to be asked to leave. The same day, the newspapers carried stories of a well-known company deciding to downsize after all alternatives had been explored and how the day was saved. The process of shortlisting those to be asked to go became the next battleground. Each time the name of someone who had spent some time with the company was mentioned, they could see in their mind’s eye the person, his track record and his family. Adding each name to the list drained them emotionally. In the case of some who were not performing well, the task was slightly easier. Then came the need for a decision on those who had been recently recruited and for no fault of theirs had to be asked to leave. Finally, the list was ready. Under advice from a senior HR professional, they did a great job of communicating individually and in groups the reasons for this radical surgery and the deed was done. They did what they had to do and, more importantly, did it in a sensitive and graceful manner. They also did their best to outplace suitable candidates.

The shock waves came swiftly and devastated the four founders. While they were mentally prepared to face the reactions, it was entirely another thing when the real thing happened. The trust that they had built up with so much care, seemed torn apart. Things have settled down in the past few months, the company is on a growth path again and the long winter seems to be coming to an end.

Competitive landscape

Today, many companies are in a position where the future can be very different from their past. This can happen equally to companies that are in trouble or companies that are doing well. Mergers, acquisitions, buy-outs and so on are commonplace now and will get even more so in a competitive landscape. Managements will need to steel themselves to make changes in their people policies to align them with the changing realities. The best that can be done is to make sure that enough care is taken when business plans are drawn up and recruitments are made on the basis of such plans.

If the circumstances force the same management to act very differently because of radical changes in business or ownership, it is best that a clean, surgical operation is planned and executed. At all times, this will need to be done with grace, reassurance for those who stay on and with a view to helping those who are affected to get alternative placements.

Shakespeare may have said that “Parting is such sweet sorrow.” But in such cases there is no sweetness; there should at least be sensitivity.

(The writer is advisor to 3i Infotech, Manipal Education & Medical Group and IDFC Pvt Equity.)

(Readers may mail us their feedback, queries and suggestions to thenewmanager@thehindu.co.in)

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