The Smart Layoff

Today’s economy leads to many layoffs across all sectors. According to TechCrunch’s layoffs Tracker, over 132,000 employees lost their jobs from August 2008 in the tech sector alone. Reductions in force (RIFs) are commonplace now but there are few best practices out there when it comes to doing it right strategically. While HR already mastered the process from their side, executives often fail to creatively think of the best way to reduce the number of employees, without destroying the company.

There is a smarter way, but let’s first understand how it is done today.

When was the last time you reinvented your company?

The only advice CEOs are getting nowadays is to cut costs and be more frugal. This is a good advice but I don’t think there is any CEO with a pulse that hasn’t heard it before. The other issue with cutting costs is that at best, it will allow you to survive 2009 and show vital signs when the economy is back on track. It would not create a competitive advantage nor will it help you deal with the next crisis or external change in the market place. The real test for a CEO is not cutting costs in time of crisis but rather finding a repetitive way to reinvent her company as market conditions change.

Take Salesforce.com. Not too many companies were able to grow from zero to billion dollars a year in less than a decade. Even mighty SAP took 20 years or so to touch the billion dollar marker. Do you remember how it all started? Salesforce.com started as, yes, sales force Automation company with a very narrow focus and commitment. Later it has expended to become a full CRM package (and picked “CRM” as its NYSE ticker). Nevertheless, in the last 3 years salesforce is becoming a platform company and pushing initiatives like force.com and App Exchange. Without judging the wisdom behind the changes, Mark Benioff built a company with “change” in its DNA. Not only does it want to change every few years, the company knows how to change and it is doing it enough to get really good at it.