Right Sizing - Managing Human Capital

Are you making the correct choices as it relates to human capital? Many organizations are being faced with challenging human resource decisions, in part because of weak economic conditions here in the United States. Unfortunately many business owners and managers find themselves aggressively engaged in “right-sizing,” a term made popular during the late 1980’s and early 1990’s. Often this term has been used to describe human capital needs aligned with revenue or profitability.

While there are many different ways to pursue economic lay-offs, these decisions and choices are never easy. Organizations need to focus on the strategic objectives and be very honest about the organizations direction. As difficult as it may be, if you are faced with these tough choices you need to focus on what is the best choice for both short and long-term survival. Often when discussing these situations many business owners and managers will quickly divert into external factors, such as the employee’s personal situation, family size, and medical conditions. As sensitive human beings we feel the pain and sorrow associated with such difficult decisions, but the reality is that we need to make choices which allow for the survival of the organization.

Below are a few points to consider, keeping in mind that every situation is unique and the appropriate call to action could vary drastically from organization to organization.

1. Headcount to revenue ratios: Are we right-sized? How much revenue does each person need to produce? (Gross Revenue / Headcount = Ratio) or (Gross Profit/Headcount = Ratio)

2. Gross Profit / Products and Services: What areas yield the most GP? Who can add value to this revenue stream? How can we capitalize on what is working well, instead of focusing on what is not working.

3. Technical/Trade Skills: What employees bring the most skills and how do they relate to items 1 and 2?

4. Outsourced Opportunities: What can be outsourced to reduce costs? While not always a good solution, it often is very effective short-term.

5. Fight of your life: If you are in the fight of your life, who do you want standing beside you? This should be based on 1 through 4 and not based on emotional choices because of compassion. Who can really make the most impact while keeping the organization progressing.

Sound too tough or too “cut-throat?” During leadership workshops and coaching sessions I have often facilitated discussions on this topic and consulted with organizations to help them think more strategically about their human capital. Nearly all employee terminations are difficult, but economic lay-offs I always find the most challenging.

Remember your responsibility to the organization for survival and profitability. Part of that responsibility is the organizations reputation, so don’t disregard the stigma of becoming a “cut-throat” entity. If you become identified as “cut-throat,” when the economic conditions improve you will have new challenges to face with rebuilding a workforce in your local community.

Thinking Outside of the Box!

Many times as we approach problems we tend to place an imaginary frame around the problem or situation. This framework that we establish may limit our ability to find alternative choices or solutions to the problem. Check out this short (3 Minute) video on problem solving and thinking outside of the box!

Leadership and Risk

Risk taking is one of the most fundamental aspects of leadership, yet sometimes formal leaders are only moderate risk takers. In some regards, true leaders may also have some identity crisis with the rebel stereotype. While this may sound extreme, it often is not too far off. True leaders are willing to take risk.

In our workplaces we may sometimes take a risk as simple as speaking up in a meeting or during a decision making process, in other cases the risk may be much more involved and with serious consequences. Risk in our workplace should be reasonable, calculated, and manageable.

Are you leading?

Find out more about leadership and risk by watching this short video clip:

Decision Making and Problem Solving

Economic woes have organizations scrambling to find ways to improve employee performance. Some employees are claiming burn-out after having to pick up work loads of other employees who have been laid off or otherwise have left the organization and their position has not been replaced. In other workplace struggles harmful conflict situations are building, in some cases they are being recognized by organization leaders and some are going seemingly unnoticed. Regardless, workplace teams often express a desire to work better together but simply cannot close the gap on conflict or negative feelings.

If the success of your organization depends on the effectiveness of your employees how are you encouraging good communication and perhaps more importantly how are the employees solving workplace problems? Are they solving them in a vacuum? Are they making group decisions?

How people work together to solve problems can make the difference between a good decision, and a harmful one. Are workplace teams responsible to make decisions and solve problems in your organization? How effective are the teams at making good choices?

Tough Times, Tough Actions!

During an economic slowdown organizations should consider how they can change or adapt to different market conditions. In workshops on change management, innovation, or strategic planning I often discuss the idea of “you cannot just do things differently, you must do different things!” Individuals, departments, or the entire organization need to re-think old behaviors and traditions.

Naturally, we are more predisposed to function in our comfort zones and to rely on our past experiences to guide us. Certainly this is not all bad, and should always be taken into consideration. The heart of this matter lies in the idea of, what are you going to do that is new, innovative, or refreshed? Don’t get caught in the trap of “we tried that before and it didn’t work.” Perhaps it didn’t, and more importantly perhaps it won’t, but don’t be afraid to take some reasonable risk and discover new strategies.

What will you do differently to survive in our “new” economy?