Downsizing Is for Sissies: Putting My Money Where My Mouth Is!

For those readers who believe that I’m way off base in my assertion that downsizing is for weak management, let me say this: Nine out of 10 companies that lay off employees do so for the absolute wrong reasons. From what I’ve seen, most companies downsize before all other cost-reduction measures have been exhausted.

Two weeks ago, I discussed the two largest areas of revenue bleeding for most companies: call centers and Web sites. (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 recoup enough revenue to get you through tough times without affecting employee head count.

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

I’ve been faced with this dilemma before. To me, it’s a clear choice — layoffs aren’t an option. For a manager, they’re not even on the table. So to put my money where my mouth is, here’s the first of two examples of how I’ve handled such crises.

Crisis No. 1
Years ago, I was hired to turn around a catalog company that wasn’t profitable. In fact, it was losing a ton of money and had been for quite a while. So here’s what I did:

1. I consistently trained customer service reps on how to convert more inquiries to sales, cross-sell more effectively, recommend exchanges vs. returns, and handle all complaints as an opportunity to build customer loyalty. The training process was simple, and the reps even had fun with it. For examples of my techniques, click here.

2. I looked very carefully at metrics, most notably lifetime value (LTV) and return on investment payback over time. I ruthlessly got rid of anything that didn’t work. And believe me when I tell you, there was a ton of media that wasn’t 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 generation programs and added much more list rental names.

3. I used one of the major catalog co-ops to build inquiry and retention models, cutting out waste by only mailing 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, among others. I also tested new Internet media (it was early in the game), adding affiliate programs, search and e-mail. Just because you have to cut doesn’t mean you can’t or shouldn’t test.

5. And finally, I renegotiated everything. I cut marketing expenses just for catalog printing and mailing alone by 20 percent.

I hope this helps. At the very least, let this show you that there are other areas to cut costs rather than making the knee-jerk reaction to lay off employees that work hard for you.

The bottom line: I was able to cut enough expenses that I didn’t have to let go of even one person.

Make the decision not to cut staff. Draw a line in the sand, and start reviewing everything. Next week, I’ll give you the second example about the start-up that ran out of money.

Jim Gilbert is president of Gilbert Direct Marketing, a full-service catalog and direct marketing agency. His LinkedIn profile can be viewed at www.linkedin.com/in/jimwgilbert or you can post a comment here or e-mail him at jimdirect@aol.com.