Recession blues Companies refocus, retrain to survive

February 17, 1992|By Michael Goulding | Michael Goulding,Orange County Register

SANTA ANA, Calif. -- Think of the '80s as an economic rain forest. Small businesses grew lush and wild.

The current financial drought has left a lot of dead wood that entrepreneurs have to prune if they hope to save their businesses. But how can they do that without killing the whole tree?

Almost weekly we see how the big boys handle the task. IBM will eliminate 20,000 jobs this year. Douglas Aircraft Co. has lopped off 15,000 jobs since mid-1990.

These companies are cutting more jobs than most small businesses have. When staff is already lean, the pruning -- downsizing is the fad word for it -- must be done with a surgeon's precision. Consider the experience of Vince DeSalvo, owner of DeSalvo Communications Inc. in Santa Ana.

He and a partner formed a corporate communications company in 1986. They specialized in print, videotape and film work. But times were flush, and the company branched into servicing 800-prefix phone numbers for other companies, warehousing and order-filling for clients, making promotional items.

Start-up costs were considerable, and the company didn't market those services well, Mr. DeSalvo said. Besides, competitors who were specialists did those services better. The company achieved multimillion-dollar sales, but profits didn't follow.

Then came the recession. In 1991, sales slipped to 1987 levels.

Mr. DeSalvo decided to return to the company's profitable roots. His partner disagreed, so they parted ways.

"I called an all-company meeting, and told them about the [partnership] split and laid out what we were going to do as a company," He notified customers of the change, laid off a couple of people whose jobs were in discontinued operations, reassigned other workers and hired an art director and administrator to strengthen the functions on which the company is now focused.

He thinks the strategy is working. The company is receiving more requests to bid on projects, and 1992 revenues might match those of the company's best year.

Regardless of size, companies need to avoid knee-jerk cutbacks when revenues fall, said CPA Arnold Mensch, who is affiliated with BusinessVision, a Lake Forest, Calif., consulting firm that helps financially struggling companies.

Many companies impose a hiring freeze, order across-the-board cuts or line everybody up and fire every third person, he said.

Such actions, taken in a vacuum, create animosity among employees and might hurt the company more than it helps, added Ronald Long, a human resources specialist also affiliated with the firm.

BusinessVision President Rick Lamprecht said the issue should be refocused on how best to serve the customer.

"Then every decision [in restructuring] is made because the customer needs it," he said.

* List all functions that ideally should be done at your company, then survey employees about all the tasks they do. Beware of the guy who claims to do too much. He might not be doing anything well.

* Look for tasks that no one does, Mr. Lamprecht said. Maybe they don't need to be done. Or maybe they're a major block to higher revenues. Also look for tasks done by too many people. They offer possibilities for streamlining.

* Remember, your employees are your greatest ally in the process.

"Many managers treat employees like the problem," Mr. Long said. Instead, "talk with employees. Divide them into groups. Ask them, 'What can we do to cut costs and improve productivity?'

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