The first time I faced a “budget cut” and organizational “downsizing” was over three decades ago! My manager informed me that we’ve had a budget cut for the next year and that I needed to reduce headcount and spending by a sizable percentage (don’t remember the exact number). I was stunned. Up until then, I had assumed that downsizing was something that happened to other managers! Wrong!
So many questions were bubbling up in my mind. What happens to the team now? How many will get impacted? Who? How do I choose? How do I tell them? On and on.
Based on the company’s objectives, we prioritized projects, identified the expertise needed for each, identified people who had the best skills for the job and assigned them to projects, and stopped when we reached the new target budget. So many colleagues were not assigned to any projects and the most painful part of the process for me was informing them that they would be let go.
I learned two fundamental lessons from that experience that have stayed with me for decades. First, no matter what industry and business you are in, external factors (the economy, customers, supply-chain, competition, etc.) can trigger internal changes which could result in budget cuts, hiring freezes, or layoffs. And second, I learned that organizations need to have some sort of “shock absorber” and elasticity for growth and contraction.
From that day on, I have followed a simple 80/20 staffing rule for my organizations, allocating roughly 80% of the headcount to full-time employees and 20% to contract employees. It takes a little while to implement it and get to the balance, but it is worth waiting for. You see, contract employees are not looking for a career, promotion, benefits, etc. They are generally free-spirited folks who want to work on an interesting project/gig, build up their experience and move on to the next. They also understand that someday they may be let go. This 80/20 approach is not to prevent layoffs but to reduce the pain when they happen. It is a win-win proposition.
Today, businesses are facing an active inflation, threat of a recession, a pandemic-hardened workforce that has a different perspective of work-life balance, a more normalized work-from-anywhere model, a new generation of employees who have “project” mentality vs. “operations” mentality, and a rapid increase of independent workers (freelancers, contract workers). Enough challenges?
I believe the 80/20 staffing strategy will give organizations a reasonable way to contract and grow while maintaining some stability and sanity within the organization. “Winter is coming!”… we may as well be prepared for it.
P2P hiring marketplace enables businesses, especially SMBs, to hire one or more contract employees from hundreds of verified and vetted service companies around the world, and at lower cost. For more information visit p2p.jobpairing.com