Episode 55: Making cuts to the team after a revenue dip

Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur. And I’ve created this podcast to help you grow your business profits and understand your business numbers without judgment and without burying you in a whole bunch of jargon that you don’t need, just actionable tips and case studies to help you grow your business. For show notes, go to the website, businessnumberspodcast.com.

I had a coaching call earlier today with somebody and the question they had for me was around making cuts to their team after some recent revenue dips. I know there’s some people out there struggling because of economic factors affecting their revenue but in this case it was totally unrelated to that, just some changes in their industry. And they were wondering “Should I make some cuts to my team now that my revenue has gone down?”. There were a few questions that I asked, that we discussed, and I thought I’d share it with you in case that was useful, in case you are in a similar position.

The first question is: are you going to replace the revenue quickly? Because if you are, don’t make a cut to the team if you’re just gonna have to hire on board and train again, because the hiring process, it can go for ages. If you can’t find the right people then you’ve gotta wait for them to give notice to their existing job, because if they’re awesome they probably already have another job. You’ve got to wait for them to do that, and then you’ve got to onboard them, and train them in your systems, and get them up to speeding. Take two to three months from the time you decide that “oh yeah, we probably better hire someone” before that someone is actually in your business running at full speed.

So if you are going to replace the revenue within the next 3-6 months maybe you don’t make the cut to the team, because it might actually be less expensive and more efficient for you to have someone on your team who’s not really doing huge amount. So as long as you’ve got the savings to cover that cost until the revenue comes back, and ideally there’s something else that you can get this team member to do. There’s a statistic that I’m not sure where I heard, but it’s something like if people are unemployed for more than six months it’s very difficult for them to find another job. And it’s not necessarily very difficult for them to find another job, it’s difficult for them to be employed again because their mindset changes about work and people kind of get used to not having to work. And there’s a risk that happens to your team too if there’s nothing for them to do.

And if you’ve got rock stars, well if there’s nothing for them to do then they’re going to be more inclined to leave potentially to find greater opportunities for growth and for doing meaningful work. If all you can give them to do is something low-level or repetitive just to keep them occupied, then it can be a bit of a challenge to keep them engaged. So the cut may happen without you wanting it to, in that particular case. 

But coming back out of that rabbit hole about rockstars and keeping them engaged and interested, if you can cover the cost of the team members for three, maybe even six months while you rebuild the revenue, you replace the revenue, and you give the team members something to do so they don’t get bored or lazy, then it can be useful to not make a cut to the team. That was my first discussion point that I went through with this particular business owner. 

If you’ve decided that “yes, I need to make some cuts”, there are a couple of ways to think about it. 

Number one is to look at how busy your team members are. Time tracking’s really helpful here, if you know what they’re doing with all their time then you can look at the time tracking. Couple of things to keep an eye out for is that there’s a lot of admin time as opposed to working on the things that their role is supposed to be for, like the main priorities, keeping an eye on admin time is a way that people will sometimes hide the fact that they’re taking too long on what they’re supposed to be doing. They can just say, “oh yeah, I had a lot of meetings” or “oh, there was a lot of slack messages”, or “there was a lot of emails that I had to deal with that day”, or “I was doing some training”. Sometimes admin time is one place where people can hide their inefficiency. Then look at each individual team member, look for wasted time, either a lot of admin time or they’re spending too long on things, or they’re doing things that they shouldn’t be wasting their time on. 

If your team does client work, I would suggest looking at each client so that you can see that you don’t have three team members all claiming time for doing the same thing that’s a one person job. You can look for inefficiencies and issues hidden within your time tracking software as one way to figure out how busy are the team. If they have a lot of spare time and then you lost revenue, then you’ve got too many team members. But again just keep in mind that if you’re planning on growing further and you have the savings to handle it maybe you don’t make the cuts. But I think if team members are hiding and being dishonest on the time tracking, then that’s a completely separate problem about trust and what else they might be hiding.

So think about how busy your team members are. Time tracking is one way, to do list project management software, like Asana, or Trello, or Monday, or Clickup, that’s another way to get an idea about how busy the team is. Always compare is that a reasonable amount they should have got done, just to make sure that they are efficient. Because no employee is going to feel comfortable having nothing to do. And some people, instead of being upfront and talking to you about it like “Hey, I’d love to do some more stuff” some people will hide it because they don’t want to get cut. Especially if there’s all this talk about the economy being bad, people may have a very real incentive to not have their hours cut because they might be worried they won’t be able to get another job or, or whatever. So open communication can help there. 

We’ve talked about do you actually want to cut or are you gonna replace the revenue quickly. We’ve talked about looking at how busy your team members are.

And the next thought is if you’ve decided you’re going to cut or that you need to cut, it’s a good opportunity to remove the low performers in your business. I know a lot of us get really attached to our team members. They feel like more than friends, they feel like family because nothing bonds people like going through stressful experiences, or high impact or high emotion experiences. There’s more than one mastermind out there that uses that as a way to help people build strong connections, they go out and they do high adrenaline things together. It helps people bond. And so business is like that, certainly for the business owner in that it’s a lot of high emotions, both positive and negative ones and a bit of an emotional rollercoaster and, the people that are there with you, you bond to them.

And something to be aware of is that you can find friends other ways, you don’t have to pay people to be your friends. You need to think about what’s best for the business, not what’s best for you and how you feel. I know business is a great vehicle to live the kind of life that you want to live, but that kind of thinking when applied to your team, and whether they stay, whether they go, whether they’re doing a good job or not, if you apply “I don’t want to be a harsh boss, [or some other dreadful thing that happened to you earlier in your career], I don’t wanna be like that. I want my environment to be X, Y, Z, blah, blah, blah”, whatever it is. If you apply that level of thinking to how you manage your team, you are going to get subpar results from them. You will build a team with a less effective culture than you could otherwise build, and that will hamper the results and the impact you’re able to make on the world and yourself. And it will also bring down the team members themselves as well. I mean, what do you want to help your team be? Do you want to help your team members be the best version of themselves continually improving, continually growing? Or do you want them to gradually slow down and get comfortable? What kind of a leader do you want to be? What kind of an impact do you want to have on these humans?

So keep that in mind that there will be low performers on your team and normally you might be willing to give them more of a chance, but in times when you need to make cuts because there’s a revenue dip, that’s a great opportunity to not let those emotions get in your way and to help improve your team. And what you’ll often find when you remove low performers, is that the rest of your team thanks you, and their productivity, and their mood, and the general culture of your business all improve. It’s surprising the impact that a low performer can have, even if they’re a nice person and it feels good to work with them. It’s very interesting to see. And this is a good opportunity. If you find that you’ve been through a revenue dip and you’ve decided that you’re going to make cuts to the team, start with the low performers or those people that you’ve been thinking, “oh, I maybe don’t really like having them on the team, but I’m growing so fast, I need to hire somebody else” and that’s taking time, and then you’re growing too much- take the opportunity to make cuts in the right places.

Okay, so I think that’s enough discussion about that. We had a longer conversation than this, but there’s no you for me to talk back and forth with, to talk about the specific examples about what’s going on in your business. If you are having a revenue dip and thinking of making cuts, feel free to reach out, I do this for a living. Or if you just have questions that I could answer on a podcast episode, reach out and let me know those as well. I’m always looking for more inspiration, but I will continue to share some things that were helpful from coaching calls with my clients and hope that is useful.

So to wrap up: we talked about making cuts to the team after a revenue dips. Will you replace the revenue quickly? Then maybe you don’t make the cut. Or if you are, then have to look at how busy your team members are to make the cuts in the right places and potentially take the opportunity to remove low performers.

So I hope this was helpful. As always let me know, and thank you for listening.

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Ben McAdam

Hi, I'm Ben McAdam. I'm a Profits Coach and entrepreneur. I help business owners grow their profits and gain clarity around their numbers, without judgement or confusing jargon. If you want some help with that: let's have a chat.
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