How To Deal With Cutbacks

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How do you deal with a cutback in labor in your department, or when things start to soften business-wise?

As a leader, how you react and handle a workforce reduction will influence the morale and performance of your team.

Good news, productivity is up.

Your company has found a better way to achieve more with less. You may be thinking, how is that good news? Think about it this way: in order to pay you and your people more, companies have to find out a way to produce more with the same level of inputs. One of the key cost areas in your company is going to be labor cost.

If you can figure out how to operate with one or two less people in your department, you’re going to find that the labor savings causes more profitability, helps your company be more competitive, provides money for new equipment, adds to job security, and potentially all that profitability could lead to a pay raise in the future.

When it’s time to deliver the news to your team, your frame of mind as a leader needs to be that productivity gains are good.

Of course, it’s not only possible, but probable that people in your department are going to react negatively about the workforce reduction. After all, one of their colleagues is going to be out of a job or transferred to another department.

labor cutbacks

Negativity is normal and you’re going to hear complaints. Just remember, you don’t have to defend every negative comment and complaint. It’s going to subside over time.

As a leader, you can listen and empathize.

Listening and empathizing means that when you hear people complaining, “I don’t know how we’re going to get the work done. How are we going to do this with one less person?” you can respond, “I hear what you’re saying. It’s hard to believe we can produce the same level of production with one less person. I totally get it. What we need to do is see how it goes.”

As a leader, how you react and handle a workforce reduction will influence the morale and performance of your team. Share on X

This brings me to the third and final point here, which is that you, as a leader, have to stay positive.

Stay positive, not necessarily cheerleader positive, it just means saying, “Guys, let’s face it, we don’t know for sure. This is what the engineering team has figured out in terms of our labor assignment. Our job is to do the best that we can with what we’ve got.”

You can remind them of their past successes, “We’ve dealt with a workforce reduction or a cutback before, and we did just fine. We produce more now with this group of people than we ever did seven years ago.”

What you’re really doing is navigating your team through the labor reduction so that they can discover whether it can be done in the future or not.

Successfully dealing with a workforce reduction, labor reduction or a cutback, is one of those experiences that shapes you as a leader.