Minimizing expenses and adapting personnel when the economy slows down - 10 tips for the CEO of a Growth Company
When the world situation changes and the company's growth slows down, the CEO of a growth company must take measures. Rather sooner than later. Often, the earlier measures are taken, the smaller measures are needed.
Currently, many companies are experiencing rather uncertain times. The growth and pace that has continued for years has slowed down and there is no clarity about the future. Of course, some companies always do well and have enough momentum, but unfortunately this is not the case for many growth companies at the moment.
I listed 10 tips for the CEO of a small or medium sized company on how to adapt the company when growth slows down. The degree of seriousness of the current situation always determines the extent of necessary measures. For some, simply terminating the "nice-to-have" services, canceling the weekly fruit basket, or canceling the benefit buffet for the time being may be enough. Elsewhere, one might have to resort to much more drastic measures and reduce personnel permanently, or at least for the time being. There are alternatives, but few of them feel comfortable. It's always hard to give up the benefits you've gained, let alone letting go of hard-to-find and talented employees who have become important colleagues or even friends over the years.
Whatever your situation, a systematic and honest analysis and swift action often bears fruit in the long run.
1. Make an accurate analysis of the situation, overestimate rather than underestimate savings needed
The first step is to make a thorough analysis of the situation. Examine the company's financial situation very critically and honestly. It is often better to overestimate the savings needed than to underestimate them, so that the chosen measures produce the desired result and you do not have to take new measures immediately after a couple of months.
An accurate situational analysis includes at least a detailed review of turnover and expenses, as well as a cash flow, customer base and market analysis. So go through all your company's costs, salaries, premises rent, office expenses, marketing expenses and other fixed and changing expenses.
By overestimating your savings needs, you give yourself room to maneuver in the future. With the chosen measures, you can then define the finality or temporary nature of the decisions, but an underestimated situational analysis can lead you right back to square one.
2. Make a clear long-term plan
Make a clear long-term plan, where you look beyond the current situation to the future and the company's goals, for example, in 3-5 years. Which elements in the company's operation are then important? Which services are retained? Which members of the team are the most important players, i.e. is it important to get them committed to the company through the crisis? This plan serves as your guideline and ensures that the measures are in line with the company's long-term goals.
Take into account economic forecasts, the market situation, competition, customer requirements and personnel needs. It's likely that you'll also have to guess at a lot of different things when making a plan, but your best guess is much better than no guess at all.
A long-term plan helps the organization see beyond the turbulence into the future and ensures that decisions are not short-sighted, but support the company's sustainable growth and success. It also facilitates making difficult decisions and communicating them in the organization.
3. Make a clear short-term plan and list the necessary measures
When the situation analysis is clear and the long-term plan is made, it's time to dive into the short-term plan and concrete measures. You may very well be facing this challenge for the first time, as the decades-long boom has presented the opposite challenges to the leader of a growth company for many, many years. Now, however, it's important to keep a clear mind and make a viable short-term plan, and quickly.
A slowdown in company growth often requires quick moves, the earlier you react, the smaller measures you can take to survive. This is why a clear short-term plan is worth its weight in gold. The plan helps the company react to changing conditions and ensure that the measures are targeted correctly.
At least ask yourself: How long will the cash last? How much confirmed billing is in the pipeline? Are there investments or expenses that can be canceled / minimized / transferred to the future? What is realistic to achieve in the next month or quarter?
At least answer yourself: Is it enough to reduce amenities or are more drastic measures needed? Which measures are implemented the fastest? Which measures immediately result in new costs? What are the expenses that cannot be waived? Is the situation (in my opinion) temporary or permanent?
There are many options for measures, ranging from cutting office expenses and services to reducing personnel, part-time work, layoffs or dismissals. The selected list of measures must be realistic and support the achievement of the goals.
Next, draw up a clear schedule and order for implementing the measures. Once the measures and schedules have been listed, it is important to also determine the responsible persons for each measure and action point and the monitoring mechanisms. Take into account that some of the measures are very easy to follow, while the effects of others can be multidimensional and even unwanted consequences can arise. Who is responsible for implementing which action? How are the consequences of the measures monitored and/or are efforts made to catch or prevent unwanted consequences?
4. Communicate openly and fairly to all personnel
When growth slows down or stops and uncertainty overwhelms the work community, one of the most important duties of a manager is open and fair communication to all personnel. This is not only recommended, but downright necessary, as uncertainty and rumors are very effective in weakening employee commitment to the organization. The more openly you can tell about the company's situation, background, reasons, measures and answer the staff's "why" questions, the better. It's not possible to overcommunicate, but it's really easy to undercommunicate.
It is important to be honest about the seriousness of the situation and the reasons behind the slowing growth. It is better for all parties if the personnel understand why certain measures are necessary. Try to avoid secrecy and secret decisions and meetings made behind closed doors until the very end.
Also communicate the company's long-term plans and measures. Tell what measures are being taken to improve the situation and how the staff's role is part of these efforts. Encourage open discussion and listen to employees' concerns and ideas. Open and fair communication can help maintain, if not a positive, then at least a neutral work atmosphere and commitment to the organization, even if difficult decisions have to be made.
High-quality communication in the middle of a crisis takes a lot of time from the manager's calendar, much more than you might think beforehand. So, as far as possible, reserve an exaggerated amount of time for conversation, presence and spontaneous moments.
5. Minimize expenses, terminate all non-mandatory services and try to negotiate discounts
When the company's growth slows down, financial management becomes of primary importance. One of the first strategic measures is to minimize expenses. This requires a thorough review of all company expenses and the courage to make decisions.
One of the most effective ways to minimize expenses is to terminate all non-mandatory services. Review all external contracts, services and software that are not essential to day-to-day business operations. Explore the possibilities of terminating or temporarily suspending these services. At the same time, of course, make sure that the company can still operate efficiently, i.e. don't cut genuinely important services just to save "a few euros from there too".
In addition, try to negotiate possible discounts for running costs. Contact suppliers and service providers and discuss the possibility of deferring payments, getting discounts or even renegotiating contracts. Many companies are willing to be flexible in difficult times, as long as the request is justified and presented politely. Of course, this is not the case with all services, but you won't lose anything by asking.
Minimizing expenses and reducing conveniences is always unpleasant, but mandatory at a time when you have to ensure the sustainability of cash and prepare for the future.
6. Make possible staff reductions fairly and in accordance with the law
If minimization of expenses is not enough, reducing personnel may be necessary to control costs in order for the company to survive. This is challenging and emotionally taxing for all parties, both management and employees. The implementation of personnel reductions requires expertise and precision in order to act correctly, both fairly and in accordance with the law.
The first step is always to verify other options for reducing personnel. Role changes and job reshuffling can help shift workforce resources to where they are still needed. Some employees may be able to be transferred to new roles or part-time positions, which in turn can help save costs without having to lay off or fire them.
However, if reducing personnel is necessary, it is important to comply with local labor legislation and the company's own personnel policy. It is important that the process is open, fair and transparent. All measures should be carried out as humanely and respectfully as possible.
Layoffs are a temporary solution that gives the company more flexibility to overcome difficult times. The company can lay off an employee when the employer has a financial or production related reason to terminate the employment contract. If the work has been substantially and permanently reduced and the employee cannot be offered other work or training, the employer can lay off the employee permanently. An employee may also be laid off when the employer's opportunities to offer work have temporarily deteriorated, and it is not possible to give the employee other work tasks or training. The situation is temporary when the deterioration of the work is estimated to last no more than 90 days. In this case, the layoff is temporary.
Termination is a more permanent and final solution than layoff. An employee can be dismissed when the work that the employer can offer has been substantially and permanently reduced and the employee cannot be placed or trained for other tasks. When terminating, the employer must comply with the notice periods specified in the Employment Contracts Act or agreed in the collective agreement and the employment contract.
The size of the company determines how personnel reductions can be implemented, at least in Finland. If more than 20 people regularly work in the company, the employer must comply with the provisions of the Co-operative Act in connection with dismissals for economic or production related reasons, as well as layoffs and part-time layoffs. The requirements and measures for co-operation negotiations are stipulated in the Cooperation Act.
7. Provide support to laid off or/and terminated employees
As difficult as reducing personnel is for the manager, it is even more difficult for the employees who are affected by the reductions. So offer support to laid-off or terminated employees. Promise to act as a recommender, write a letter of recommendation, share information about the vacant employees with your networks (if you get permission to do this) and/or be an emotional support if the employees want to rely on you.
It may also be that the laid-off or dismissed employee is not interested in receiving help from you in re-employment, and in that case the outplacement services of external operators can be of help. Outplacement and career coaching services can often be individually tailored to the needs of employees.
When you, as a manager, show genuine concern for laid-off or fired employees by offering support and resources, it not only helps individuals adapt to the change, but also promotes possible future cooperation. "Finland is a small country", so remember that you never know who you will meet in any role in the future. So always treat everyone as you would want to be treated if you were in a similar situation.
8. Offer support to the remaining staff and build faith in the future
When difficult decisions have to be made, such as organizational changes or personnel reductions, it is equally important to pay attention to the personnel remaining in the company. Even if the situation is difficult, try to maintain a positive work atmosphere among those who stay. Their contribution and commitment to the company are key to future success.
Open communication is of primary importance. Tell the remaining staff honestly about the situation and the reasons that led to the reductions. Understandably, many may be worried about the safety of their workplace and the success of the organization in the future as well. Answer the questions and be present, don't hide behind closed doors or a laptop.
Build faith in the future. Have an open discussion about how you can take the company through the difficult times together and how each of you can contribute to this with your own contribution. By offering support and creating faith in the future, the company can best maintain a committed and motivated staff who are ready to face difficulties together and overcome them.
9. Make a situational analysis regularly - how the effects are visible and whether the assessment of the future has changed
Continuous monitoring and evaluation of the changed situation should not be forgotten after large (or small) measures have been implemented and evaluation should be done continuously until we are in so-called clear waters. When managing a growth company, you can rarely rely solely on the original plan, but must flexibly adapt to changing circumstances. A situational analysis, for example, every month can help the company stay up to date on how the slowed growth affects the business and how the implemented measures have had an impact.
Regularly assess whether there have been changes in the future outlook. Assess whether the original forecasts are still valid or whether they need to be updated. This may require a reassessment of the situation and possible follow-up measures, positive or negative.
10. Take care of your own endurance and, if necessary, ask for help with the implementation
As the CEO or a manager of a growth company, it is easy to immerse yourself in work and completely forget to take care of your own well-being. However, it is especially important in difficult situations to take care of your own coping skills.
First, acknowledge your feelings and don't shut them out. Making difficult decisions can cause a lot of anxiety, guilt and stress. It's normal to feel this way, and it's important to give yourself permission to process these feelings.
Also remember to take time for yourself. Even if the company has a crisis at hand and very difficult times, work must not take over your whole life, no matter how challenging the situation. Exercise and hobbies can help you relax and keep stress under control. Try to stick to a regular sleep pattern and eat healthy. Do things that are important to you and spend time with loved ones. Share your experiences, peer support is often really important in terms of coping.
It is important to know your own limits. So don't try to shoulder all the responsibility alone. If necessary, ask for help and support either from your colleagues, your network or external professionals to manage and implement the situation. Remember that taking care of your own coping is not selfish, but absolutely necessary so that you can be strong and support other people in your organization and move forward with the necessary change measures.
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Change is a possibility, but uncertainty is always burdensome. The earlier and the clearer you can open up the situation to yourself and your team, the better conditions you have to get out of the situation with minimal damage. Difficult decisions should not be procrastinated, because often this only deepens the hole and with it requires bigger and even more difficult decisions.
If you are struggling with a slowdown in growth and are thinking about which measures would suit your company and how best to implement them, I’m happy to help. You don't have to go through everything alone. Skilla specializes specifically in solving the growth bottlenecks of small and medium-sized companies, from a personnel perspective. This means both growing the company and scaling it down, depending on the situation and need. Send a message or call, and we'll discuss your situation further.
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