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Shrink at your Own Peril!

Updated: Apr 5

Tom Peters wrote The Circle of Innovation (You Can't Shrink Your Way to Greatness) in 1995, and its message is as relevant today.

Innovation is the only perennial strategy of success. Full-stop. (That’s “period” to our American colleagues). If we don’t innovate, we lose ground or our market share to those who do innovate.

I recently reread Peter Cheales’s “I was Your Customer” series. He quotes a Right Associates study – led by Virginia Lord – which polled 1204 American companies, each of whom had downsized its staff by at least 500 people during the 1980’s recession. “75% reported no improvement in financial performance, (while) 66% said there had been no improvement in productivity and (fully) 80% noted a significant decline in standards of customer service.”

Being the last man standing can make you feel insecure. Or bitter. And if you are "Top Talent" in your industry, you will likely already be aware of your value and be seeking out greener pastures. The challenge is that customers cannot be served by a vacuum. It takes well-trained, professional staff who understand the needs of customers to satisfy customers.

So often a glance at a spreadsheet or analytics dashboard informs a choice, but it cannot be an executive financial decision alone. Just like sales are most likely from existing customers, our existing people are our best resource for innovation and service improvement, if we engage and involve them. Capacity is tangible. Should you shop at a premium grocery store, your expectations of service would likely include certain levels of interaction with staff, short queues and proactive resolving of queries. Should that capacity not be present, you might excuse it once, but a pattern of unmet expectations will draw you elsewhere instead. Without sufficient "hands on board", service suffers in retail. Likewise, we can only "squeeze the orange" so much before it has no more juice to give. Our people require resources - support, encouragement, time and space to think critically and positive environments in which speaking up is not a career-limiting move.

Most companies who downsize don’t really have a clear idea how cost-cutting will affect the organization. The focus is on reducing expenditure/head-count/risk. While investigations into resource-wasting are to be encouraged (the Lean movement is noteworthy here), training and retaining your best performers enhances your competitive advantage. Some "insider knowledge" is irreplaceable, and some relationships are not transferable in the short-term.

Sports teams understand that one "transfer window" does not define them. Rather, they need a strong identity (a badge that inspires passion and performance), a way of playing and a commitment to each other that sees them collaborate - playing for each other, the coach and the brand. It is not primarily financial: rather, it is psychological engagement (they must choose their destination, after all) and a willingness to do what's necessary to remain at the top of one's game.

Sustainable differentiation involves Service and Value-creation. Research suggests that business focus on growing our revenue (top-line) - as a priority at least as important as cost-reduction/ efficiency imperative. That is how we improve our (bottom-line) profitability. Where is there an opportunity to branch out into new markets? To partner differently, or adopt a fresh approach? researching customer needs and meeting them? Networking with clients, in a more intimate and inclusive way? Risk is real, but so is retention. If we can keep our people boldly embracing our brand (playing for our bade, so to speak), we can inspire individuals to bring their "whole self" to work, and teams to be more than the sum of their parts. People deserve this investment as much as our businesses do.

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