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Welcome to my blog for all things related to business quality (processes, systems and ways of working), products and product quality, manufacturing and operations management.

This blog is a mixture of real-world experience, ideas, comments and observations that I hope you'll find interesting.

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February 2009
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Over-cutting and the four month rule

In the current economic climate jobs seem to be disappearing at an alarming rate.

I'm old enough to have lived through many recessions but this one seems to be particularly vicious – although the graphs that we get shown in in the media indicate that it is merely typical in terms of severity, it doesn't feel typical. The number of old friends and colleagues who are affected seems to be extraordinarily high.

Maybe it's just that we didn't have Robert Peston in the seventies and eighties.

What I do see this time round is over-cutting of headcount, maybe through panic, maybe through a feeling of obligation to follow the trend, maybe through fear that things will get far worse, but over-cutting nonetheless. I see or hear of examples every week.

I had a great Quality Manager a number of years ago – let's call him “Steve” (because that is his name!). Steve was a fount of wisdom and advice on many subjects, and on the occasions that the company had to lose staff he would always say “we'll get away with it for now, but everything will start to all apart in four months' time”. He was invariably right.

This doesn't mean that job-cutting is the wrong thing to do; not at all. The name of the game during this recession is survival, and with the unavailability of credit and shrinking markets it may be the only solution open to many companies. But do bear in mind Steve's four month rule – even before you have paid all the redundancy costs the effects will start to bite and, in many cases, they can be worse than you expected.

So cut if you have to, but beware of over-cutting. Do you have alternatives to losing staff?

And when you really do have to cut, how are you going to cover the ground that the lost staff used to cover? The obvious risk is that of overloading the remaining staff so they become far less efficient or just leave of their own accord; in both cases it can cause serious problems. If we believe Steve, and in many cases he was proved right, you have four months to improve your ways of working and your business processes so that X people can be as effective as X+Y.

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