Last week, we talked about some of the reasons to avoid layoffs. Cutting head count appears to be the fastest way to cut costs, but it has a devastating and long-lasting impact on the organization. There are effective alternatives to dumping human assets.

Because I am in the people development business, I believe that investing in developing people is a clear competitive advantage when other aspects of products and services can be imitated. 

But if downsizing is necessary, how should you handle it? When deciding to eliminate employees, most organizations use one of four strategies: attrition, voluntary termination (buyouts and early retirement offers), termination and across-the-board cuts. Wayne Cascio, author of numerous books and articles on downsizing, has researched the issue and concluded that in managing the downsizing process, there is a set of behaviors that should be practiced, because how people are treated when they leave affects how people who stay feel about the company.

Transparency in communication: Employees want to know the truth about the challenges facing the organization and the impact on the work force, and they want to hear it from the CEO. When people know what is going on, they can be part of the solution.

Sensitivity toward employees: Immediate supervisors, not human resources (HR) representatives, should deliver the news to affected employees and be able to explain the business case and criteria being used. The role of HR is to listen and assist in severance packages that need to be consistent across units and divisions.

Fairness in procedures: Employees perceive more fairness and a sense of personal control when options are provided for choices.

Options when leaving: Allow people to leave with as much grace and dignity as possible. What message is sent when long-time employees are escorted out of the building by security guards as if they had committed a crime?

Attention to “survivors”: They also are experiencing a transition. They need to know why they should stay and why new hires should stay.

A level of downsizing may be necessary because cash flow is critical, but know that there may be better alternatives. What about asking employees how to cut costs? Some companies have done this and been amazed by the creative ways employees have found to cut costs while keeping people. They know best how to do their jobs, and they often know ways that money is being wasted. 

Explain the situation. Tell employees about the costs that need to be cut. Ask for their input and help. Let me know what happens.

– Jann Freed is a leadership author, trainer and coach.

To submit a guest opinion for possible publication in the Business Record, contact Managing Editor Jim Pollock at jimpollock@bpcdm.com.