Pre-emptive Layoffs

By Laura Duggan     Add your comments

When the economy is struggling, timing is everything in keeping your business afloat, or as Jason points out, you can’t be too early, but you can be too late.

Businesses are dealing with the economic environment in a variety of ways. Entrepreneur Jason Calacanis did some pre-emptive cuts at his company called Mahalo, and then, in his email newsletter, offered some very interesting tips. He asked that the newsletter not be republished, so If you want to receive it, email him directly. However, here are some of the key points he made:

1. “The most important thing to realize in a situation like we’re facing is that, chances are, you cannot act too quickly, but you can easily act too slowly….If you’re going to make cuts, set a time table based on analysis,strategy, debate and execution.”

2. “It’s emotional, it’s personal, and it sucks…try and detach yourself from the emotion of the situation so you can make the right decisions.

3. Analysis: “The first step was getting out our P&L and looking at each line item in detail….Question every dollar you’re spending and ask yourself: “Is there a better use for this dollar?””

3. Strategy Part One: “The obvious stuff (i.e. office space)” Strategy Part Two: "The hard stuff (i.e. people)…try to do a reorganization where we shifted our full-time editors at our office to work at home freelancers.”

4. Strategy Part Three: "Revenues Bottom line: We’re getting focused on revenues a little earlier than we thought we would, and that’s never a bad thing in my mind.”

5. Debate: "The fact is, too much debate is probably not going to help. As the leader of the organization, you can take all the information in and make a quick decision. If you cut too deep, you can hire folks back, and given the economy, it’s better you secure your company’s survival right now and think about scaling up when the market gives you some signs of hitting a bottom.”

6. "Execution

  1. Don’t spread layoffs over multiple rounds
  2. Don’t lay people off one at a time, do it as a group.
  3. Don’t sugar coat it..
  4. Cutting salaries over headcount is generally not a good idea.
  5. Be as generous as you can: Give severance even though you don’t have to. Vest as much extra stock as you can even though you don’t have to. Offer freelance work to as many folks as you can. Offer to give amazing references to everyone on the team and to introduce them to as many potential employers as you can. If you think there is a chance that you’ll have open positions available again at some point, offer them to people.
  6. Don’t drag it out
  7. Get everyone focused again"

Note: If you want to subscribe to Jason’s email list you can do so at “Jason mailing list”:

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