(The following is a true story that was shared with us by a current BiZZdesign client. All details have been changed to protect the anonymity of the source.)
It’s a morning like any other morning sometime in mid-March and the COO of a large automaker is on his way to work. All of a sudden, the silence in his car is broken by a text message. “Get rid of all contractors by Friday”, it says. “More at 10am meeting”. It’s a simple enough message sent by his friend and boss, the company’s CEO.
Get rid of all contractors? By Friday? That’s… one way to start the week.
As you may have guessed, this is happening during the COVID-19 pandemic of 2020 and things are getting very serious, very quickly. What started off like a distant nuisance, grew into a problem, then a global crisis and now, with the company’s stock diving 47% in two days, the organization is faced with an existential challenge. In fact, the whole economy seems to be going south and with everyone panicking the potential for even more downside is real.
As it stands, revenues are drying up and organizations are desperately seeking ways to keep the ship afloat. This is the situation that the automaker’s CEO finds himself in at the start of our story. Naturally, with sales dropping due to general uncertainty, the only other lever that he and other executives have left to operate is cost reduction, the other side of the profit equation. Well, contractor costs (IT contractor costs in particular) are rightfully the first thought to enter any decision maker’s mind when faced with the need to slash all non-critical costs. After all, that’s the main benefit of hiring contractors for staff augmentation, right? You can expand or contract as demand dictates.
It is bad enough to have to do it. Worse if you don’t do it right.
The automaker’s CEO would agree wholeheartedly, which is why during their weekly 10am meeting he instructs the COO to work double time on offloading this financial burden by the end of the week. “It’s unfortunate but there’s absolutely no way around it. We have to eliminate all contractors immediately”, he concludes. This is a junction point in our narrative, so please imagine the story splitting into two parallel universes.
- Scenario 1: Acting in haste. In the first scenario, the story is defined by what feels decisive, but is in fact driven by panic and hasty action;
- Scenario 2: Informed, fact-based decision-making. In the second scenario, action is taken just as fast, but it’s facts and informed decision-making that decide what happens.
So let’s see how it all unravels.
SCENARIO 1: A CASCADE OF UNINTENDED CONSEQUENCES
Decisive, blanket cuts across the organization
Upon receiving the directive from the CEO, the COO and the apparatus supporting him spring into action at once. Across the world, the heads of all lines of business, the regional directors, the middle managers who keep everything running smoothly and on schedule – everyone – is told that they are to inform the contractors who report to them that they are relieved of their duties effective immediately. Due to the uncertain times ahead, the company is forced to minimize its liability and as a result personnel cuts have to be enforced.
Trigger a vicious downward spiral due to ignored interdependencies
Naturally, for the people losing their job this comes as a huge blow. However, there’s another demographic that’s disheartened by the news, and that’s the people who either reported to or expected reports from contractors. A plethora of team leaders and senior developers are now left holding a gun that’s shooting blanks. After all, if you’re heading up a team that’s working on the electrical cabling for a new model and your team just lost 30% of its members (perhaps the best ones, too), then are you realistically going to be delivering what you’re supposed to deliver when you’re supposed to deliver it? Probably not.
Across the organization, from the UK to North America and Singapore, everyone is wondering what this will do to the day-to-day, but also to key ongoing projects. They don’t have to wonder for long. Internally, key value-added processes are affected by the reduced personnel. There is an immediate drop in pace, but the initial drop is not the worst of it. As the days and weeks pass, deadlines come and go with projects not reaching their milestones. What was a simple canceled meeting one week is now a trend in week three, with stakeholders at all levels finding it increasingly difficult to push the ball forward without important feedback.
And compounds company’s challenges
Interestingly, the company may have only fired part of its workforce but even those who remain find their productivity slumping. Critical initiatives are of course delayed. These concern the company’s future products, innovation and research programs – many valuable assets were working on cutting edge initiatives and they are now gone due to the blanket measure. In other words, people are worried and oftentimes overworked etc. Additionally, and not that it needed further reasons to decline, the company’s stock declines even more as the market raises big questions on whether or not the company will be able to achieve its strategic goals.
Conclusion: Company resilience weakened rather than strengthened
The result is that while these decision may have saved the company some money, it really did nothing to increase it’s the company’s ability to better navigate the rough times ahead. By simply chopping off a part of the organization that represented a discretionary – and therefore eliminable – cost, the company in fact critically disrupted the remaining components and hurt the enterprise. When all is said and done in this imagined timeline, in addition to the already formidable challenges that is faces, the organization will have created a host of additional and avoidable current problems due to its rash decision, or rather the indiscriminate manner in which it was executed.
Tune back in next week when we’ll go over the second scenario!