When downsizing an organization, how do we ensure we are cutting the right jobs?

This is a great question, and one that is particularly relevant in today’s economy. We have found that while most managers agree that strategy drives structure, this is often forgotten in times of turbulence and staff reductions. In truth, being clear about strategy and the implications on structure and staffing is every bit as important during downsizing as it is during periods of growth. It is more time-consuming than deciding on solutions such as across the board cuts—where every department has the same percentage reduction requirement—but it also ensures far better positioning for the future. In order to cut in a way that maximizes impact, you have to have a strategy that is both clear and done in such a way that you can prioritize work.

Strategy is Key
Often strategy is used to describe budgets and forecasts. Sometimes managers use the word strategy to designate a business objective. Neither of these provide context that allows for effective prioritization or the ability to determine what work is strategic to the business. We advocate an approach to strategy that describes how you will create competitive advantage and distinctiveness. This involves answering two questions:

1) What unique technical and social capabilities will you focus on to create and sustain competitive advantage?
2) What about your products and services create distinctiveness in the eyes of your target customers?

These questions are not simple to answer, but when answered well, they provide a succinct and easy-to-communicate strategy that informs what opportunities you will pursue as well as what you will say no to. Equally as important, it provides a framework for identifying what work is strategic and provides context for effectively structuring the business. 

Prioritizing Work
When the business strategy is clear it makes more sense to be targeted in where you cut and why. Strategic clarity allows you to answer the following questions about an organization’s work:

• What work should be the object of our most intense improvement efforts?
• What work activities need to be improved together and which can be improved separately?
• What work should be eliminated?
• What work should we outsource?
• When is efficiency (i.e., doing things right) and when is effectiveness (i.e., doing the right things) the most useful driver of improvement efforts?

Strategy clarification assists restructuring by establishing a basis for prioritizing organizational work. Most businesses that are successful at restructuring are able to identify and protect the work that creates competitive advantage or distinctiveness in their industry. A clear understanding of the business’ strategy also helps groups operating outside of competitive advantage work processes reexamine and restructure the work they perform. Crafting the right kind of strategy is not always an easy process, nor is restructuring, but done well, few actions will create the value these activities will.