Trimming the Fat: Why Your Company Might Be Overstaffed and How to Fix It

When taking over a new company, one harsh reality often emerges: overstaffing. It’s an uncomfortable truth that many organizations carry around dead weight that hinders efficiency and productivity.

As a fractional CEO, I offer services where I become the CEO of your company for 3 to 6 months, or I am brought in as a consultant to cut costs and make necessary changes.

I assume that there will be a 20% cost-saving measure in personnel, whether that’s due to overstaffing, legacy hires, or inefficiencies in the organizational chart.

Below, you will find my step-by-step guide on how I determine who will be terminated.

1. Review the Organizational Chart

The first step is to evaluate the current organizational structure. This involves scrutinizing the existing chart to identify gaps or redundancies in roles and responsibilities.

Once I have a clear picture, I compare it to an ideal structure based on the company’s current and future needs. This helps in identifying areas where changes are necessary to streamline operations.

2. Assess Employee Fit

Next, I determine if the right people are in the right roles based on the old organizational chart. Transitioning to the new organizational chart, I reassess employee fit.

This involves considering each employee’s skills, experience, and performance metrics to ensure they are best positioned to contribute to the company’s success.

3. Identify Legacy Hires

Legacy hires can often be a sensitive issue. These are employees who might be in their positions due to historical or personal reasons rather than merit, such as relatives of executives or long-term employees who no longer contribute effectively.

It’s crucial to investigate these cases, evaluate their performance, and understand their impact on the organization.

4. Evaluate Retirement and Outsourcing Opportunities

Identifying employees who are close to retirement or could transition to outsourced roles is another critical step. Offering buyout packages to those near retirement can be a respectful and efficient way to manage overstaffing.

Additionally, assessing roles that could be outsourced efficiently and economically helps in optimizing the workforce. Open communication with these employees is essential to understand their willingness to transition or take a buyout.

5. Analyze Performance

Conducting thorough performance reviews is key to identifying underperforming employees. Using metrics such as productivity, goal achievement, and peer reviews helps in assessing performance accurately.

For those identified as underperformers, a plan for performance improvement or termination must be developed to maintain high standards within the team.

Bonus: Evaluate Cultural Impact

Sometimes, overperformers can be detrimental to the company culture. These are individuals who, despite their high performance, negatively impact team morale, collaboration, and the overall work environment.

It’s important to assess their impact and decide if their contributions outweigh the negative effects on culture. In some cases, addressing their behavior or letting them go may be necessary to preserve a healthy work environment.

Conclusion

By following this systematic approach, you can ensure that your team is optimized for efficiency and aligned with your company’s strategic goals.

While it’s never easy to trim the workforce, these steps provide a structured way to make informed decisions that benefit the organization in the long run.

Feel free to reach out if you have any questions or need further insights into optimizing your team. Let’s drive our businesses forward, one strategic decision at a time.