Archive
Reflexite’s Chart of Options Before Downsizing
Apr. 1, 1999
Reflexite’s Business Decline Contingency Plan
| DEFINITION | SYMPTOMS | ACTION TO BE TAKEN | EXPECTED RESULT | |
STAGE I: | Sales below budgeted sales but ahead of the same period in prior year. | - Bookings below plan for four weeks or more.
- Field reports confirm it.
- Backlog levels off.
- Large order levels fall.
- Book-to-bill ratio falls below 1.
- Profits below plan.
| - Defer some budgeted hires.
- Defer some budgeted activities.
- Heighten awareness of current situation.
- Discuss at staff meetings.
- Monitor overall economic conditions.
| Adjust revenue and expenses to meet plan. Preserve all jobs and expected future stock value. |
STAGE II: | Sales and profits below prior year for a period of one quarter or more. | - Bookings below plan for one quarter or more.
- Profits below prior year
- Backlog declines 15%.
- Incentive pay on sales slips below plan.
- Larger customers’ businesses decline or develop credit trouble.
| - Revise Selling, General and Administrative (SG&A) expenditures.
- Revise forecast.
- Solicit ideas to cut costs, improve productivity and efficiency from employees.
- Cut overtime.
- Cut discretionary spending.
- Redeploy sales force.
- Increase cold calls.
- Accelerate new product introductions.
| Same as in Stage I. |
STAGE III: | Business operates at break-even level or generates losses of less than $100,000 for a period of one quarter or more. | - Backlog declines 30% from previous high.
- Bank loans increase.
| - Solicit ideas to cut costs, etc. from employee-owners.
- Voluntary leaves and furloughs.
- Voluntary leaves and furloughs.
- Hiring becomes the exception.
- More reduction of SG&A expenditures.
- Increase management attention.
- Monitor Stage II actions for results.
- Defer lower-priority capital items.
- Introduce a more aggressive revenue-generation strategy.
- Price cuts on specification items.
- Sales of obsolete inventory.
- Offer extended terms for new business.
- Accelerate new product introductions.
- Delay refilling of vacated positions.
- Accelerate capital work with less than one year payout.
- Defer raises.
- More rigorous performance reviews.
- Defer or reduce salaries for highly compensated employees.
- Reduce hours.
| Revise plan to meet revenue expectations. Preserve jobs. Expected stock price above last year but below planned value. |
STAGE IV: | Business generates losses for a period of two quarters or more. | - Lose customers.
- Lose technological lead.
- Core products lose market share.
- Banks look at loans’ status more carefully.
- Suppliers don’t send materials due to unpaid or late-paid invoices.
- Stretch out payments to suppliers.
- Lose good employees.
| - Salary deferments or reductions for balance of exempt employees.
- Trim benefits.
- Early retirements.
- Voluntary resignation offering.
- Layoffs.
| Downsizing required. Some loss of jobs. Stock price falls below prior level. |
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