When taking over the Commerce Department, Howard Lutnick cut 20% of the workforce (12,000 people) immediately. His rationale is that making deep cuts quickly and decisively removes uncertainty. It signals to remaining employees that restructuring is over and "the next shoe is not going to drop tomorrow," allowing them to refocus.
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CEO Ryan Cohen revealed that GameStop went from over 1,400 corporate employees to just 400, yet became more productive. He argues large corporate teams create bloat, perverse incentives, and delegation of work. The radical downsizing improved focus and business results.
Challenge the 'hire slow' mantra. Hiring is an intuitive guess, so act quickly. Once a person is in the organization, their performance is a known fact, not a guess. This clarity allows for faster decisions—both in removing underperformers and, crucially, in accelerating the promotion of superstars ahead of standard review cycles.
When faced with total collapse, Harvey Firestone didn't just cut prices. He used the crisis as a filter to identify employees who thrived under pressure and ruthlessly simplified the company, cutting the sales force by 75% and the ad department from 105 to 7.
Companies are framing necessary cost-cutting (driven by high interest rates) as strategic layoffs due to AI-driven efficiency gains. This allows CEOs to maintain a positive, innovation-focused narrative while tightening their belts for reasons they'd rather not publicize.
The conversation around AI and job reduction has moved from hypothetical to operational. Leaders are being instructed by boards and investors to prepare for 10-20% workforce cuts, ready to be executed. This isn't a future possibility; it's an active, ongoing preparation phase within many large companies.
When facing emotionally difficult decisions like firings or reorgs, it's tempting to optimize for making people happy. The correct mantra is 'serve the business, not the people.' A successful business ultimately benefits everyone involved. This principle provides clarity and helps you make the right, albeit painful, call.
While mass firings of federal workers may not significantly alter overall payroll statistics, their real impact is a potential shock to consumer and business confidence. This second-order effect on sentiment is a key underappreciated risk that the market has not fully priced into the US dollar.
Facing a revenue crisis in the 2008 crash, Tim Guinness made his team redundant but immediately offered to re-hire them at half their salary. This transparent but painful move retained key talent, with nine of ten affected staff accepting. Pay was restored within 15 months.
High-performing CEOs don't hesitate on talent decisions. One mentor's advice was to act immediately the first time you consider firing someone, as indecision only prolongs the inevitable and harms value creation. This counteracts the common tendency for CEOs to be overly loyal or fear disruption.
Pendo's CPO argues that the first 90 days are a critical window for a new leader. You were hired to change things, so you must assess and act quickly on team or strategy adjustments. Delaying beyond this window leads to paralysis, as "no decision is also a decision."
