Corporate Downsizing: How Can You See It Coming?

Downsizing in Corporate America has become a way of life. Until the economy turns around, jobs will continue to be eliminated. Hundreds of major corporations all over the country have decreased head count in order to save money and increase profits. When times are tough, the first expense a company looks at is payroll.

When this happens there usually isn’t anything you can do to stop it. Take solace though, because you are by no means alone. With the unemployment rate at 4.8%, thousands of jobs no longer exist.

What you can do is make yourself aware of your current situation, and if the outlook is bleak, prepare yourself to move on. It all starts with becoming cognizant of your company’s performance and looking out for signs that may indicate something is imminent. Most of the time employees that are let go are not aware of these signs until after the fact. By becoming conscious of some of these indicators, at least you can prepare yourself and get ahead of the game by exploring other opportunities.

Here are ten signs and indications that downsizing could be on the horizon.

Profits Down

Stay in tune to how your company is doing financially, with the key indicator being net profit. A decrease in profit is the first gauge to a high-level decision maker like a CEO that something needs to change. Simply put, either costs need to decrease or sales need to increase.

There is a difference between profits being down and a company actually losing money. A decrease in profits is just the beginning. But, if the company gets to the point where they are losing money it is more likely that corrective action will be taken.

You need to educate yourself by getting in tune with the company’s financial key performance indicators, and know what they all indicate. Just because the company loses money for a month or two, does not necessarily mean there is a major problem. You have to watch for trends; how much money is being lost and for how long. The longer the duration and the higher the dollar amount lost, goes in direct correlation to whether or not something needs to be done. If the projection is that they can recover, then in all likelihood downsizing will not come into play. However, if they are so far behind they cannot catch up, employees need to be aware of possible trouble on the horizon.

Check your company’s history. Try to find out if they have ever lost money before. If they did, what did they do about it? If your company has never lost money before, expect there to be some panic and major changes.

Corporate Reports and Announcements

If your company leader, usually the CEO, sends out monthly or even quarterly reports stating the financial status of the company, read these very carefully, especially if the company is struggling financially. More often than not, subtle hints are passed through these announcements.

The tone of the note and the financial results are your indicators of how the company is doing and where they expect the future to go. If the tone of the note is harsh, it is for a reason. It usually indicates that changes could be coming. Again, the financials are the tell tale sign. If they are not included, ask for them. You have every right to know.

Depending on the sense of urgency, many leaders include a plan as to how they will rectify the current status of the company. Look for terms like: reevaluating personnel; getting leaner; too fat in certain departments; positions being evaluated, etc. These are very clear indications that job eliminations are coming. Very few companies, unless they are major corporations followed closely by the media, will ever make a public announcement that they will be downsizing.

Policy Warnings

This is what I call the excuse announcement or set up. If your leaders send company wide notes to all employees, you must read them. Take heed to any company wide warning or reminder of policies that they feel are being broken. Any one of these policies can be used as a cause for your dismissal. And if they are, the company is not responsible for paying a severance package. They can even reject an unemployment claim.

Examples would be: abusing email for personal use; tardiness; abusing hours; smoking; not attending meetings; abusing travel or expense accounts; harassment; internet abuse; etc.

The reality is that most employees do bend some of these rules. And even though most are quite harmless, it is irrelevant. So, tread lightly. If a note comes out saying management is watching these behaviors closely or that they are instituting a zero tolerance policy, they could very well be looking to use these as a smokescreen excuse to let you go.

Reports can be run on just about anything, especially expenses and computer usage. The bottom line is, you can be fired for breaking any kind of written company policy without warning, especially if it is zero tolerance.

Again, a dismissal of this nature saves the company more money than just salary. That is why tactics like this are used. So, be very careful.

New Leadership

Be leery of a new regime. If changes are being made at the senior management level it is for good reason, and there is a plan. Most of the time the company is looking for fresh ideas to increase business and decrease costs. With so many lean management structures out there corporations are looking to do less with more; meaning more work and less bodies. By bringing in senior leaders with vast experience in leadership tools like Sigma Six, the first thing they will look at is head count. Most managers like this will be looking to make an immediate impact to the bottom line, by creating savings and cutting costs. The easiest way to do that is to cut payroll and eliminate jobs.

Job Justification

Most companies have detailed job descriptions for every position on file in the human resource department and in your manager’s files. If your boss or a member of HR department asks you to document your job, daily routines and tasks, this could be an indication that your position is being reviewed and monitored for possible elimination. They will try to sugar coat it saying they are doing it for all positions. But, the realization is they probably are not. So, unless your position is brand new, or you know that it is being restructured, be inquisitive and seek the exact root cause for this type of inquiry.

Relationship Changes

If you get along well with your boss and co-workers, and all of the sudden you feel like something is changing, it probably is. Stay in tune to how you are being treated and for accusations that are out of the ordinary. For example, if your boss starts to tell you that your co-workers are complaining about you for petty things like talking too loud or laughing, it could be a sign of things to come. Unless you have a reputation for that kind of behavior, this is another smokescreen. Your boss could be purposely creating excuses so he has a case to let you go.

Salary Level

If you are not a senior manager, but your salary is one of the highest in your department, you are a prime target for downsizing. Most mid-level management positions are replaceable or can be eliminated if the level above and below can take on the work. Remember, the company is looking at moves that will have a big impact to the bottom line. If your salary is $75,000 to $100,000, you have a bonus program, a large 401K, and have full benefits your total impact to the company is over $200,000 per year. Cut five jobs like that, and they just saved the company one million dollars.

Signs From Your Boss

If during any kind of meeting, your boss indicates that he can run the group or department with less people, do not dismiss this. In all likelihood he is looking to eliminate jobs, and it could be yours.

Most of the time, revelations like this come from a new manager, or a manager who is under extreme pressure to cut costs. If you and your group have been told about this idea, you can bet it has already been discussed and agreed upon at the highest management levels. Simply put, a plan like this will not be made public knowledge, unless it has been approved. Some times this manager is brazen enough to tell you a plan is already in the works. If he does, get your resume out because you could be losing your job.

Protocol Broken

In most companies there is an accepted protocol for dealing with different levels of employees. For instance, if the VP requires something from a mid level manager or supervisor, he usually tells his director or sr. manager. Or if a director needs something from non-management personnel they usually tell that person’s manager.

If you are seeing continuous examples of your boss and other managers bypassing you, and going straight to someone who reports to you, this is could be another sign that something is up. They are testing that person to see if they can handle higher-level tasks and projects, and at the same time they are sending you a message. That message being, we do not need you.

Grooming a Replacement

One of the primary responsibilities of any manager is to groom a replacement. A manager strives to bring in and train someone to take their position, so they can continue to grow and move up the corporate ladder. During this process a manger promotes the subordinates good works, exposes them to other managers and teaches them the inner workings of the management position. However, this can be a catch twenty-two. If you groom someone well, and the company is performing poorly, you can very likely be replaced by the person you groomed. Unfortunately, you can get punished for doing this part of your job well.

Conclusion

In the corporate world, there is nothing more devastating than being victimized by a blind-sided firing. The only things you can do are make yourself aware of the company’s current financial performance, look for signs of downsizing and prepare yourself to possibly move on. Err on the side of caution. Do not ever take the stance that this will never happen to me, because trust me it can. If you have a feeling that something is not right speak up to try and find out what is going on and get your resume out there through recruiters and job search engines. You never know, you may find a better job before they have a chance to dismiss you.