Rightsizing Your Association - Four Proven Alternatives Every Association Executive Should Know

No matter how good an association manager you are, the time will probably come when you either want to or will have to downsize. There are better and worse ways to do it, which one you chose will matter. Let's briefly look at the pros and cons of four proven alternatives through a real example. You might choose any of these and be in great company. One may be more right for you than another, but consider them all.

The Problem at the International Health Care Association

Careers are on the line. At the International Health Care Association (not their real name), revenue was up - but not up to plan. Costs unfortunately were at plan.

In July the Chief Executive told the board that cuts would occur. The questions: How should IHCA cut, and how deeply?

They looked at these alternatives.

The Cheese Slicer Alternative

Used in either blunt axe or thin slice versions this model slices costs evenly from every department. IHCA chose this method earlier when it asked each Vice President to cut his or her expense budget by 10%.

The concern with the slicer is cutting people and functions without regard for their value. If one group is performing outstandingly, it gets the same penalty as one that has not. The perceived inequities and inefficiencies that come out of this can and do cause even more damage to morale than layoffs.

By delegating responsibility for individual cuts, you are in a no win situation. You will face charges of refusing to make hard decisions, refusing to get involved in the business. But, if you take the decisions back, you are interfering and indecisive.

The advantages of the model are that it acts to empower the management. They own the responsibility and the authority to do what they think is right.

The Challenge Alternative - Re-engineering

This model calls for your team to challenge every activity of your organization. However, successful challenging of work is difficult to carry out. It's difficult to get so far into operational issues and to bypass the clearly political boundaries that exist.

Recognize that this is a dangerous tool. Friends of mine have crippled businesses by ignoring the pervasiveness of re-engineering. Don't try to restructure the whole organization at once unless you have a safety net to cover the disruption. IHCA bypassed this option.

On the positive side, when it works, it works very well. There are cases of even large industrials such as Ford cutting departments by 80% while increasing their productivity.

The Save the People Alternative

The Save the People Model calls for cutting any expense except people. They are immune. This model works on the principle that people are your greatest asset. When it is time to cut, you cut capital expenditures, discretionary expenses, even R&D. People are the last to go. Several divisions of IHCA used this model in 1990.

The risk is ineffectiveness and potential paralysis. Since payroll is one of the largest items in your budget, you may be left with no choice but to eliminate critical tools. This gives people assignments that are almost impossible to achieve. That may paralyze them. This happened at IHCA. Productivity plummeted as people tried to do their jobs without critical tools. Worse, they felt that they had been set up to fail.

Even so, you might choose it for good reasons. Protecting people can have very positive morale aspects. Employees tend to respond well if they feel valued. Additionally, if you are looking to recovery, you should be protecting the resources that you will need first. For many associations, this resource is your people.

The Jigsaw Management(TM) Alternative

This alternative is a blend of the others, using jigsaw puzzles as a simple memory tool. In use, you ask each manager to pretend that their job is like a complicated jigsaw puzzle. The manager has more pieces than will fit, and a time limit to finish by.

The first step is to look at the "boxtop." This is to learn what pieces they can afford to ignore. The second step of assembling is to throw out the pieces that do not fit. To set the boxtop, you can ask yourself and your team to answer these questions:

When we are done with this reorganization:

  1. Who will our members be?
  2. What will they want from us immediately?
  3. What skills will we need to deliver that?
  4. What tools will we need to deliver that?
  5. What will the members want from us in the near future?
  6. Can we get the tools and skills for that just in time for delivery?
  7. What possible reason is there for keeping any additional skills or tools?
  • Chart - Jigsaw Questions for Downsizing

Place the emphasis on identifying the minimum necessary skills, tools, and expenses necessary to serve your members or customers. If your management team can succeed in brutally, honestly, and privately identifying these skills, you can then look to see if you wish to afford the luxury of other expenses.

There is a risk here, and that is that you will discover that someone's pet idea is an extra piece. It could even be yours. Jigsaw Management has the advantage of bringing your team to the best use of resources with at the smallest cost in time, people, and money. You get your biggest leverage for expense.

Where to Cut, Where to Invest - an Example

One of IHCA's projects is a $20M revenue group. With clever controls, they are ahead of their profit target, but cost cutting will be necessary. The controller and the operations manager suggested cutting two unfilled sales positions. There are five key, equally weighted objectives for the group. They are:

    • Profitability,
    • Member satisfaction,
    • Financial,
      Market share, and
    • Account control.

The controller argued that maximizing profit outweighs all of the other objectives. If so, cutting the unfilled spots is the correct move.

So why did they choose something else? In the project's boxtop, two of the five objectives (market share and account control) focus on sales. They need the sales positions to support that. So to be true to the goals and strategy, the management team's decision was to invest there.

An Alternative for Recovery

With the economic upturn, rightsizing decisions are even more critical. By defining your organization, they define your preparation for recovery. Using these alternatives, you can lead your team to make those decisions correctly. You can keep resource usage to a minimum, including the most expensive resource - your time.

Peter Meyer speaks worldwide and writes on practical management and strategy issues. A principal in the Meyer Group of Scotts Valley, he invites you to see him on the podium at the ASAE Annual Meeting in San Francisco. He also tells us that he truly welcomes any questions you may have from this brief article, and that you should feel free to call him at (831) 439-9607 for more details.

This article appeared in similar form in Dateline in September, 1994. It is copyright, all rights reserved, by the Meyer Group.

Side Bar

Should You Lay People Off?

This year you may face a decision to shrink your association management team. It may come with warning. It may not. You may have a choice although many won't. In fact the decision to reduce your work force could be your idea. You might cut staff because you have a healthy operation and you want to keep it that way. Doing so may be the example of the future.

Just before Christmas Paul Allaire (the CEO of Xerox) announced that his company would release 10,000 employees. What made this interesting in a year of large company layoffs is that Xerox is strongly profitable. His rationale? "To compete effectively, we must have a lean and flexible organization." Cutting heads is no longer tied to losing money. Now it is a tool to make more.

Look at downsizing independently of recession. The sense of lushness and marginal capacity that we felt in the 1970s and 1980s is gone. Between September 1 and the Xerox announcement, fifteen major US corporations announced reductions totaling 88,000 people. Until recently, only organizations that were losing money or markets would lay people off. Now things are changing. Of those fifteen companies, at least eleven are profitable. What does this mean to associations?

We are entering a phase of true leanness, which will be good for us all. Mistakes that were hidden before are more obvious now, and we can deal with them. That is an advantage the instant that you start to face the future. Finding and dealing with excesses now will improve your ability to deal with the end of the recession. It will also save you untold time, money, and people problems that might otherwise cripple you as you grow.

Assembling the Puzzle

Let's extend the model a little. If you were the executive of IHCA starting to look at the problems, you might first try to find the boundaries of the issue. That gives all of the people doing the puzzle an obvious starting point. It provides a boundary to work within and a reference point for the next pieces of the puzzle. If the people putting the puzzle together can see the boxtop, the easiest, quickest, and most accurate decision in the world may be whether this piece of sky fits next to that clump of cloud.

For every situation there are a number of questions to answer before you settle anything else. Using Jigsaw Management an executive team can create the frame by setting the boundaries for the decision first. This also establishes a framework for future decisions. A good decision meets two criteria. First, the answer fits the overall plan of the organization. Second, it uses the fewest resources to get the result.

IHCA's Example

For IHCA to use the Jigsaw Model, you would first ask what IHCA should "look" like when the cost reduction is done. What does the team see as its results? They looked at questions 1, 2, and 5 from the chart and started to answer them. Will it be an airline specializing in certain kinds of travelers? Will it be a company that supplies certain kinds of disk drives or fasteners to five large customers or a particular industry? Will it be a hospital that hopes to attract regional doctors by becoming famous for heart transplants? Will it be a premier service company in a commodity product market, like IHCA wants to be? What do our customers want and need from us?

The answer to this is the beginning of the frame. The questions in Chart X add to the frame. They need not be back to the basics type of answers, but they do need to be clear.

If you are running IHCA, you have some questions to answer. Will IHCA be centralized? Decentralized? Flexible? Empowering? Autocratic? These are more pieces of the frame. Will it use direct sales? Who are the top three customers by name or type? Competitors? More pieces of the boxtop.

Clarity and comprehensibility are the key concerns. You may be tempted to say "both distributed and centralized, both direct and distributor sales" in answer to some of these questions. But it is not something that managers can lead their own efforts and teams by. They need a clear and compelling boxtop to do their job.