In mortgage banking, it is a common practice that when volume drops, sales professionals are cut. But often, there is no rhyme or reason to this strategy. In an excellent Harvard Business Review article, “Layoffs that Don’t Break Your Company,” authors Sandra J. Sucher and Shalene Gupta discuss how other industries have faced tough layoff issues, what the research shows and their recommendations for better ways to manage staff reductions.

Clearly, downturns can occur in any industry. Some are unexpected and others are seen by executive leaders but not addressed until it is too late to turn the company around. “Layoffs have been increasing steadily since the 1970s," Sucher and Gupta note. "In 1979, fewer than 5% of Fortune 100 companies announced layoffs but in 1994 almost 45% did. A McKinsey survey of 2,000 U.S. companies found that from 2008 to 2011 (during the recession and its aftermath), 65% resorted to layoffs. Today, layoffs have become a default response to an uncertain future marked by rapid advances in technology, tumultuous markets and intense competition.”

In the article, the authors cite research from Auburn University, Baylor University and the University of Tennessee “that found companies with layoffs are twice as likely to file for bankruptcy as companies that don’t have them.” If layoffs are not that beneficial, then what makes better sense as a management strategy?

Managing Workforce Change

Sucher and Gupta recommend three strategies that center on having a macro topic of workforce change as an ongoing management responsibility. Senior managers should ask themselves the following questions:

• How will we plan for workforce change on an ongoing basis?
• Who will be accountable for managing and supervising it?
• What metrics should we use to determine whether our actions are effective?

According to the authors, “a workforce change strategy should anticipate three different scenarios: a healthy present, short-term economic volatility and an uncertain future.” Here are their recommendations for each:

• Healthy present: disciplined hiring and strict performance evaluation including twice-a-year employee reviews
• Short-term volatility: reassign current employees to other positions that they are matched to perform
• Uncertain future: if a major restructure is needed to transform the business, it is important to treat employees fairly and assist them to find another position outside the company/industry. More than just being the right thing to do, this approach recognizes that former employees can become future customers. It makes good business sense to treat them with respect.

These solutions are more important than ever because of the projected global workforce crisis in 2030 when labor shortages are expected to be in full force. If you believe finding sales talent is hard now, it could be much more difficult in the future. The hope that technological advances will fill in workforce gaps is foolhardy since customers still want human contact when securing home loan financing.

While some sales positions may be reduced in the future, the fact remains that people want to deal with people and customer-facing positions are not going away. This means that originators who have not been successful at generating referral sources might be better served in another, more appropriate position. Instead of just laying off sales professionals, it is time to look at other potential options for individuals. Sometimes this will require retraining. Other times, it will require changing the sales process where individuals can move into support positions. Not all originators will want to be retrained into other roles but some will. The good news is that assessments can help managers make the best decisions on whether an individual has skills that can be applied to another position.

My psychology partners and I have been working on this topic for over a decade and have rolled out assessments that analyze and compare a producer’s talent set with other mortgage industry positions. In my view, laying off an originator is unnecessary if the individual can be matched to another position in the company. It is short-sighted to cut staff in one area when an employee already knows the group’s culture. It makes better sense to move someone to another part of the business that needs help.

How well are you managing workforce changes in your sales organization? Are you laying off staff in reaction to low volume or are you taking a more proactive approach that supports long-term success?

Pat Sherlock is the founder of QFS Sales Solutions, an organization that helps organizations improve their sales talent management and performance. For more information, visit https://patsherlock.com.