“That December was the worst in my life,” recalls Bob DuBree, owner of Creative Contracting, in North Wales, Pa., whose payroll went from 16 to eight in just six months. Cutting staff is a task that business owners dread, which is why many delay doing it. Take Ken Moeslein, whose Legacy Remodeling, in Pittsburgh, went from 64 employees to 40 in one fell swoop. He waited months after financial reports suggested that he reduce payroll. “You have to think it through first,” he says, “before you start messing with people’s lives.”
Experts say that decision can be easier to make and execute with a plan for staff reorganization tied to key benchmarks. It made a difference for Gary Demos, president of Dave Fox Design/Build/Remodelers, in Columbus, Ohio. Alarmed by developments in housing and credit, Demos met with his managers in May of 2007 to put together an action plan in the event of a slide in company volume. His plan "established some benchmarks" — backlog, leads, number of design retainers, volume — "so that we’d know what to do,” he says. Once reached, those benchmarks would trigger a delay of discretionary purchases, the sale of some assets, and, worst-case scenario, payroll reduction. Such a plan, says remodeling consultant and longtime REMODELING columnist Linda Case, "can really push you into doing what you have to do." And, she advises, "You're better off cutting a little harder than you have to and cutting at one time than nibbling away," though, Case admits, this is "easy to say, but is very hard to do."
What to Do
Say you have no such plan. Here's what some remodelers advise:
Start with an annual operating budget for your company. The more data you have about what it takes to sustain your business, the better. By setting up metrics at the beginning of the year before an emotional fire storm hits, your planning can be more rational.
Don’t wait. Act when the numbers on your balance sheet tell you that you should do something.
If you can, downsize all at once rather than in stages — otherwise everyone wonders who'll be next.
Evaluate each employee on performance (i.e., contribution), seniority, talent, and job skills. Owings Brothers, in Eldersburg, Md., for instance, made an A, B, and C list of field employees.
Be open about what you’re doing and why. Tom Kelly, president of Neil Kelly Co., in Portland, Ore., issued a memo with each of three rounds of cuts, outlining what the company was doing and why. "In that kind of situation, you want to remove the uncertainty.”
—Jim Cory is editor of REPLACEMENT CONTRACTOR, a sister publication of REMODELING.
This is a longer version of an article that appeared in the April 2011 issue of REMODELING.