Want to avoid ugly layoffs? Prune and upgrade as you go

(Editor’s note: Will Herman is an entrepreneur who has founded or held senior roles at several tech companies. This column originally appeared on his blog.)
An investor and board member of one of my early companies used to say: “any day, any time, you can fire a canon through the company’s building and not miss the employees taken out in the blast.”

I wish I could definitively say that he phrased it that way just to emphasize the point that a company can almost always trim or upgrade its workforce, but knowing the guy, I’m not entirely sure he wasn’t recommending that his suggestion be followed literally.
I never did follow that board member’s precise instructions and, perhaps because his point was so blunt, I never really got a handle on the meaning behind his controversial statement.  The fact is, though, that his point is an important one that very few managers understand until it’s too late.
It’s easy for any manager, in the throes of intense deadlines and seemingly insurmountable stacks of work, to grab as many resources as possible to help them get things done.  In the frenzy, hiring standards are often lowered and the management and training of junior people is sometimes ignored.  Inevitably (and yes, it happens to all managers no matter what they think), organizations get bloated.
Sometimes they become larger than they need to be. Other times, they’re staffed with the wrong people - people that don’t have the right skill-set, are not organizationally aligned or are too junior.
Because this situation develops slowly over time, it’s generally not recognized until it’s too late.  And, since the workload never seems to subside, very few managers have the fortitude to step back and fix the problem - by cutting or changing staff - once it’s recognized.  In fact, the knee-jerk reaction is to continue to add more resources.
So, how does a manager avoid the problem?  By recognizing that it’s almost inevitable from the beginning and by consciously remaining lean and focused at all times.  An organization should have as few people on the payroll as possible – just enough to get the job done right.  In order for that to happen, all the people need to be the right people – those that are as qualified for their roles as possible.
Even groups and companies that have achieved such organization nirvana need to be constantly evaluated.  Goals and strategies change and it’s unlikely that everyone who was perfect for the roles required earlier will still be the best candidates for what is needed moving forward.
I’m not suggesting heartless slashing and burning here, just a thoughtful and constant evaluation of what is needed to get the job done most efficiently.  It may seem painful to make cuts and changes along the way, but it’ll be way less painful than making emergency, large-scale cuts later when expenses get out of control.
Here are some guidelines that might help to implement a process of dynamic pruning and upgrading of your organization.
When:

Now.  It’s the best time to start.  Immediate action may be required if you’re already in some financial trouble, but if you’re ahead of the game, a thoughtful analysis now will set you up for making changes at the end of your current project, fiscal period, employee review or other time you get to catch your breath (if even for a second) in your business.
Then, re-evaluate at each chance you get.  Employee reviews are always a good time because they force you to think through the performance of an individual – are they the one you want in their role moving forward?
When you’re doing planning for the next fiscal period, especially when that includes staffing plans.  Is your organization as productive as it should be?  Instead of thinking about size, think about productivity.  How much more will you get by adding another employee at the same productivity level?

Who:

First evaluate the managers that work for you.  They’re the most highly leveraged people in the organization and must be the best fit for their future roles.  A non-ideal manager will hurt productivity more than non-ideal individual contributor.
How is the group performing?  Is it cohesive?  Are there people who disrupt the group internally?  Disruptive individuals hurt the productivity and effectiveness of others and, therefore, put a drag on the whole group.
The person with the right skills might not be the person who knows the most or even works the hardest – it might be the person that learns the best or adapts the easiest.
The kind of people you hire and retain sends a strong signal to the entire organization about what you value in your employees.  What message are you trying to send?  What do you value?

How:

Never reduce your standards when hiring.  It’s just not worth it.  The cost of waiting for the right employee is almost always less than the costs associated with hiring someone, investing in them for six months then discovering it’s not going to work.  You’ll make hiring mistakes for sure, but fight the urge to ignore the stuff you already know is important.
Look at the organization as a whole as well as the individuals in it.  Is the organization producing as much as it should?  Is it producing the quality of product or service it should?  Sometimes the conclusion is self-explanatory – “why aren’t we moving further/faster with all the people we have?”  Sometimes the organization is doing too much.  Sometimes, too little.
It’s almost never a good idea to fire someone out of the blue, without trying to work with them on their issues or train them to be better at what they need to do (although there are certainly times when immediate firing is necessary).  If you hired right, you can usually bring people around.  Your desire to shape the people in the organization will also been seen by other employees who will get the message about how you are dedicated to those that are there.
If, after working with an employee – including training them on any new job responsibilities, your gut tells you that you can upgrade – do it.

As I mentioned earlier, this type of problem happens all the time and, while it’s difficult to avoid entirely, it’s possible to stay on top of and make sure that bigger problems don’t occur later.  Like most self-help programs, the first step is recognizing that you have a problem or, at least, a potential problem.  You then have a shot at managing it in a thoughtful, proactive manner.