John Allen: How to keep your company healthy in poor economic times Featured

8:01pm EDT March 31, 2012
John Allen: How to keep your company healthy in poor economic times

When times are lean, eliminating excess and making do with less is simple common sense. That’s true for households as well as companies. However, the recent economic ups and downs have prompted some companies to cut so much fat that they have become too lean ? they suffer from what some call “corporate anorexia.”

Most Americans are all too familiar with anorexia, a physical and mental health condition that results in otherwise healthy individuals starving themselves. Despite the disorder’s pervasiveness in our culture, we rarely think about anorexia in relation to companies. It is, however, an appropriate description of companies that, perhaps due to managers’ fears of economic unknowns, get overly lean by cutting jobs.

Eliminating jobs, either through layoffs or attrition, is not in itself unhealthy. In a slow economy, it is often an unavoidable maneuver to reduce cost structures and operate more efficiently. However, when companies cut too deep or remain too lean for too long, they can experience languid performance and ultimately stagnate growth.

The damaging effects of corporate anorexia manifest themselves in a variety of ways:

Corporate anorexia can have an immediate and devastating effect on a company’s existing work force. When a company cuts back, remaining employees are often required to work additional hours or take on added tasks with little or no added pay. In a tight job market, employees are unlikely to complain, but over time, they are sure to feel increased stress and job dissatisfaction, and those overworked and underpaid employees will be quick to leave should an opportunity present itself. If you are suffering from corporate anorexia now, it will only get worse if those few key people decide to leave.

Even if an anorexic company manages to retain its best, most experienced people, how effective can they be? It is inevitable that when there is too much work, things fall through the cracks. Ultimately, product and service quality, along with customer responsiveness, can suffer. The potential for lost business is obvious.

When a business is “lean and mean,” it is thought to be quick, agile and responsive to market movements. But being too lean can have the opposite effect. When a company is too lean, it does not have the energy (in the form of “manpower”) needed to respond to opportunities quickly. As a result, the anorexic company misses opportunities for new business and potential growth.

Almost all of us binge now and then. We allow ourselves to eat a little more on vacation or over the holidays, knowing we can cut back later to lose the added weight. As individuals, it is relatively easy to change course, but it is not so easy for companies. Just as it takes time to cut back, it takes time to staff up again. Managers can’t decide to staff up for a project one day and have qualified people on site ready to work the following day. They have to recruit and hire the right people, and then those people need time to be trained and get up to speed. When companies become too lean, proactive recruiting efforts are a positive step in the right direction, but the benefits can be months or even years away.

With so much negativity surrounding the current economy, it is natural for managers to think about getting lean. It is smarter, however, for managers to plan wisely so their companies remain healthy in spite of the economy.

John Allen is president and COO of G&A Partners, a Texas-based HR and Administrative Services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com.