Downsizing is for sissies: Putting my money where my mouth is!


For those readers who believe that I am off base in my assertion that downsizing is for weak management, let me say this. 

9 out of 10 companies that layoff employees, do so for the absolute wrong reasons.  From what I have seen, most companies downsize before all other expense reductions measures have been exhausted. 

Two weeks ago, I discussed the two largest areas of revenue bleeding for most companies; their call center and their website.

To read that article click here:

I’m willing to bet that if you just fix the gaping holes in those two areas, you can win back enough revenue to get you through tough times without affecting headcount.

Unfortunately that’s the road less traveled.  The easy way out is to cut staff. 

I’ve been faced with that issue before.  To me it’s a clear choice.  Layoffs are not an option.  As a manager they’re not even on the table.  So to put my money where my mouth is, here are two short stories of how I have handled such crises.

Crisis one, how it was resolved:

Years ago, I was hired to do a turnaround for a direct marketing company that wasn’t profitable.  In fact they were losing a ton of money and had been for quite a while.  So what did I do:

1.     I trained our customer reps constantly and consistently how to convert more inquiries to sales, cross sell more effectively, recommend exchanges rather than returns, and handle all complaints as an opportunity the build customer loyalty.  The training process was simple and the reps even had fun with it.  For more on how to do it see my article series: Click here

2.      I looked very carefully at metrics, most notably LTV (lifetime value), and ROI payback (this was a catalog company) over time.  I ruthlessly got rid of anything that didn’t work.  And believe me when I tell you this, there was a ton of media that was not performing even on the front end, much less on a LTV basis.  Our major point of entry for prospecting was lead generation.  I dumped a great deal of two step lead gen programs and added in much more list rental names.

3.     I had one of the major catalog coops build inquiry and retention models, cutting out waste by only mailing to names of old customers and prospects that were in a buying frame of mind. 

4.     I set up new small scale tests of other direct marketing media, print, package inserts, card decks, and tested new internet media (it was early in the game) adding in affiliate programs, search and email.  The point of this is simple.  Just because you have to cut, it doesn’t mean you can’t or shouldn’t test. 

5.     And I renegotiated everything.  I cut our marketing expenses just for catalog printing and mailing by 20%. 

I hope this helps.  At the very least let this show you that there are other area’s to cut costs rather than knee-jerk your way to laying off employees that work hard for you.

I was able to cut enough expenses so I didn’t have to let go of even one person. 

Bottom line.  Make the decision not to cut, draw a line in the sand and start reviewing everything.  Next week, I’ll tell you the second story about the start up that ran out of money (and provide you more tips within the story).

Jim Gilbert is the President of Gilbert Direct Marketing, Inc., a full service catalog and direct marketing agency.  His linkedin profile can be viewed at http://www.linkedin.com/in/jimwgilbert., or email him: jimdirect@aol.com.

 

3 Responses

  1. Great straight forward advice. Have you ever noticed Jim, that many companies have no idea why they chose certain media to advertise in other than they were approached by a salesperson who sold them a bill of goods. They have no criteria to judge whether it is working for them – everything is by the seat of their pants. When it inevitably fails, they proclaim, that “advertising doesn’t work for them”. Their marketing’s message are mere marketing fluff with no compelling message.

    Now you have a colossal waste of funds.

    I love your frankness, i’ll be back here again.

  2. Very thought provoking and practical. Look forward to part 2

  3. Jim,

    You’re absolutely right, weak managers make weak decisions based upon their intrinsic lack of ability to do the job at hand. Both entrepreneurs in over their head as their companies grow and Peter Principled managers ( http://www.envisionsoftware.com/articles/Peter_Principle.html ) who grew from lower layers of the organization but don’t have the unique skills that management requires are subject to this judgment.

    Resultingly, these weak decisions can very well be things like firing people before doing other things that could reduce costs, perhaps effectively enough to keep the lights on.

    But, to say that “most companies” “biggest bleed areas” are their call center and their website is just plain myopic and preposterous. Perhaps in some extraordinarily granular stratification, a narrow segment may meet your criteria, but you have not stated that segment.

    I have “call center” to worry about, as everyone is paid on commissions and my websites have had the same limited costs for years.

    Your tips for trimming the fat are great, but unfortunately, the bad taste of generalities made it hard for me to make it to those very salient points.

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