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Thinking of layoffs? Here’s a better alternative

Layoffs can often be worse for your company than seizing the opportunity to rightsize your workforce instead, writes Joe Raymond.

4 min read



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The recent spate of layoffs, particularly in the tech industry, has made business owners question how they should approach their employees. Due to the pandemic, companies are now rebalancing — or rightsizing their workforce. Several companies kept employees and delayed restructuring decisions longer than they would have if the pandemic hadn’t happened. On the other hand, most small and mid-sized businesses are still growing, but they’re also struggling to hire quality talent and accommodate the compensation demands of their employees.

Within the span of a few months, more than 100,000 workers were laid off from companies like Google, Meta, Amazon and Netflix in anticipation of an economic downturn. The cutbacks spread beyond tech workers, as businesses of all sizes began shedding workers. In March, another round of layoffs hit the tech industry as Amazon cut an additional 9,000 jobs. Many companies assume that they must lay off workers because they see other panic-stricken executives doing so. In the long run, rightsizing hurts profits due to negative publicity, damaged reputations, knowledge loss, low engagement, poor morale and low innovation.

Instead of layoffs, seize this opportunity

However, there is an opportunity for small and mid-sized businesses to acquire the talent they need to grow. During recessions, firms often believe that reducing employee numbers is a quick fix to their economic or financial concerns. Ultimately, these separations are costly, and those who remain wonder if they’ll be the next. The threat of a recession doesn’t mean drastic action is required. Rather, it gives businesses the chance to accelerate growth by optimizing their talent and performance. If small and mid-sized business owners use evidence and sound data to operate their companies, they won’t be forced to rightsize their workforces. They can seize the opportunity to hire the right people and create high-performing teams.

Despite inflation, supply chain disruptions and talent shortages, many of these companies still need skilled employees. Now is the time for small and mid-sized businesses to be proactive and make restructuring decisions that will protect their employees. Although reducing employee numbers often seems like a quick fix to financial problems, it can also lead to low morale, poor performance, high turnover and a fractured culture. Instead, leaders should plan strategically and forecast cash flow in different scenarios in case tough times arise. It’s up to leaders to motivate their employees by involving them in solutions, increasing accountability and rewarding them. Additionally, they should hire strategically to remain competitive and prepare their workers for the challenges of the current market.

Rather than laying off employees, here are five ways to minimize costs:

  1. Leaders need to identify their current sales pipeline and future growth to create a long- and short-term strategy. It is essential that talent and financial resources are optimized.
  2. Test your capacity to handle the worst-case scenario. A weekly cash flow report, projected out throughout the year and adjusted weekly, will give you a clear picture of any cash flow deficiencies, and allow you to develop a plan to deal with them.
  3. Analyze employee performance goals. A company’s KPIs must align with employee performance goals to ensure financial success. It is important for leaders to hold employees accountable for their individual, departmental and divisional performance, and reward them accordingly.
  4. Leaders can outsource a business’s non-core functions, including HR, customer service, marketing and accounting, to reduce fixed costs. Instead of hiring full-time employees, they can also utilize fractional professionals and executive talent. In the past, outsourcing was exclusively used by large companies. However, with the advancement of technology, it is now easier for companies of all sizes to save money by contracting work to specialists.
  5. Set measurable expectations and regularly monitor employee performance to keep track of progress. The leadership team should hold regular one-on-one meetings to ensure that employees are aware of expectations and priorities, and they should communicate effectively and transparently to motivate them.

When businesses focus solely on the balance sheet, they tend to overlook the intangible costs of staff reductions. Many organizations can’t replace the knowledge they lose about their customers, their processes and their businesses when long-term employees leave. As a result, revenue is lost, productivity is low and results are subpar. If company leaders examine the true costs of cutting labor, they’ll find there are several other tactics they can use to optimize talent and boost profits.


Joe Raymond is the managing partner of RVR Consulting Group.

Opinions expressed by SmartBrief contributors are their own. 


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