Even as I was having my conversation with the client who can’t pay us, I was doing the math in my head about what this client’s lack of payment for past work and lack of orders for future work would mean for our cash flow. And that led to concerns about the number of employees we have.
In this type of situation, you have to watch the financials closely, but at the same time, you already know something is going to have to be done. I realized that I have at least three people who suddenly don’t really have enough to do. Sure, they can help on other lines, and that offsets some of the financial bleeding, but lack of volume is still lack of volume.
I mentioned this on a morning bike ride with some business buddies. They were clear: Do not wait. And cut more people than you think you need to, because you don’t want to do another layoff a month or two from now if you can’t get more work into the shop. Continuing reductions in force really sap morale.
“Fred, right-sizing is just one of those things you have to do from time to time,” one of my buddies said. “Think of it as a rebalancing of the company. It just needs to be done. If you bleed too much red ink, you put the entire company at risk.”
Right-sizing. Rebalancing work and labor. Nipping the risk in the bud. It all sounded jargon-y and clichéd. But it made sense. And I’ve always had two rules:
1) Don’t lose money. Do what ever you have to do – work harder, work longer, whatever it takes. But do not lose money.
2) If you are thinking that it might be O.K. to lose money, see Rule No. 1.
I met with my financial person. What would cash flow and work flow balance look like if I were to cut four or five people? The words stuck in my throat. I guess right-sizing and rebalancing did not make complete sense to me after all.
This is not some homework assignment or theoretical exercise — this is real life. These are three salaries that don’t have enough work to pay for them. Plus two more to provide a cushion.
Can I blame Viktor Frankl, Dan Levinson, W. Edwards Deming and the other authors I have been reading for the unsettling nature of my emotions about this? Their writings are the ones that showed me the way to re-engage with work. Yet, there is no pride or joy in what it looks like I will have to do.
It’s not going to be a good night. If I’m not here for the money, why am I here?
Fred Warmbier owns Finishing Technology Inc., which is based outside of Cincinnati. He writes these posts with Kelly Allan, who runs a consulting firm that emphasizes the teachings of W. Edwards Deming.
Kelly L. Allan
Senior associate of Kelly Allan Associates, Ltd