I’ve been talking to some of my peers about the economy and it’s getting more and more difficult out there. There has been a lot of conversation around lay-offs and downsizing. With revenues down, companies are doing what ever they can to remain profitable and survive. We’ve all had to do it and it’s no fun.
The stories are interesting and painful. Companies are laying off 5, 10, and even 20% of their organizations.
One of my peers was telling me that during his most recent layoff, people were let go who were integral to over 10 million dollars in new sales opportunities. In one case, his sales team is to present to a perspective client for a 6 million dollar deal this month and the key technical expert on the account was let go. At the time of this post he has yet to find a replacement. The most recent cuts at his company have put 10 million dollars in new sales at risk in an effort to save money. It doesn’t sound too prudent does it?
Organizations, like people, tend to lack creativity and objectivity when they are scared. No one is willing to take a risk and they have a tendency to see things for what they are. The spreadsheet takes over and if it can’t be measured, easily measured, no one pays attention to it.
While my friend and I were talking we got on the subject of how much work it is to close a deal at his company. The processes are cumbersome and time is wasted in non-selling activities. He was frustrated with the amount of work the processes entailed and how it negatively effected sales. With even less people, he is concerned its all just going to spiral out of control, more deals lost, more sales cuts, more revenue at risk, more deals lost, more people cuts etc. He was really concerned they were in a death spiral.
There are 3 main things that impact revenue and sales, product, people, and process. People get the most attention. When times are good, hire, hire, hire. When times are bad, fire, fire, fire. Unfortunately, you can’t not fire your way to survival. At times like these looking at the entire picture is critical. What products can you get rid of? What products are losing money. What are the costs associated with them? Find them and get rid of them. Streamline your product portfolio, make the tough choices and trim them down.
Process is the other area. Few organizations evaluate their existing processes to determine their cost. Processes have a cost, a real tangible cost. Figure out what the expensive processes in your organization are and fix them. My friend was telling me his sales people (these are high-end sales people making over 200k a yr.) spend hours a week hunting down 16k orders or filling out paper work for mailing $500 dollars worth of product. An organization that has high-end sales people spending hours a week on trivial efforts has processes costs that far exceed their people costs.
Getting lean, saving money and becoming efficient is critical during a down-time. Expense to Revenue management is critical. Cutting people is part of the process. However it is also the easiest. The good companies will look at more than just the people. They will get real with their organization and ferret out savings in product and process as well as people.
Eventually cutting people will cost you more than you save. My friend is very concerned. He thinks his company has cut too deep and will lose more than they save. If what he is telling me accurate, that he has over 10 million dollars in net new sales at risk due to the newest round of cuts . . . I think he’s right. His ship may be sinking.