Your Layoffs Aren’t a Strategy
- Randall Sellar
- 19 hours ago
- 4 min read
Why maximizing capacity beats minimizing cost.
Margins shrink. Forecasts decline. Boards call for discipline. Almost instantly, the same lever is used: reducing headcount.
Layoffs are portrayed as prudent and necessary leadership measures. Sometimes they are.
However, here’s the truth that may be uncomfortable:
Layoffs are not a strategy. They are a tactic, and tactics alone, without a system redesign, seldom address the real issues.
1. The Cost-Centre Strategy Is Incomplete
Payroll appears clearly on a P&L. Capability does not.
That visibility shapes behaviour. Leaders manage what they can see. Compensation becomes something to control rather than something to optimize.
Cutting headcount can improve short-term financial metrics. But it does so by reducing capacity. And when capacity shrinks faster than complexity, performance strains.
There’s another lever that receives far less attention: productivity per employee.
Revenue per employee.
Decision cycle time.
Cost of turnover.
Cost of disengagement.
Duplication of work.
Time lost to unclear priorities.
These are not “HR issues.” They are operating performance variables.
Gallup research consistently shows that highly engaged teams deliver significantly higher productivity and profitability than disengaged teams. That gap is not theoretical; it shows up directly in operating margin.
If a team of 100 people improves productivity by even 5%, the financial impact often exceeds what a modest reduction in force would achieve, without the downstream risk of lost capability, morale shock, or rehiring costs six months later.
In a 30-person company, that same 5% lift can equate to the output of one or two additional full-time roles without increasing payroll.
Cost reduction is defensive.
Capability improvement is strategic.
One protects the margin. The other expands it.
2. Most Organizations Operate Below Their True Capacity
The uncomfortable reality: most companies are not under-talented. They are under-aligned.
In many organizations, performance friction hides in plain sight:
Priorities shift without being retired.
Decision rights are unclear.
Strategy is communicated once but not embedded.
Incentives reward activity more than outcomes.
Teams duplicate effort because coordination is weak.
None of this shows up clearly on a balance sheet. But it shows up in slower execution, diluted focus, and inconsistent results.
This is where “culture” is often misunderstood.
Culture is not morale.
It’s not perks.
It’s not an engagement campaign.
Culture is operational clarity.
It reflects how well people understand what truly matters, how swiftly trade-offs are addressed, and how consistently daily decisions support the overall strategy.
McKinsey’s research on organizational health shows that companies with strong alignment and execution discipline significantly outperform peers over time. The difference is rarely talent density. It is coherence.
You don’t increase performance by hiring smarter people into a misaligned system. You increase performance by reducing friction inside the system.
When leaders complain that “people aren’t stepping up,” the issue is often not motivation. Its design.
Are priorities constrained?
Are leaders modelling trade-offs?
Do KPIs reinforce strategy or contradict it?
Is accountability tied to outcomes or effort?
When those elements align, performance rises without adding headcount. When they don’t, even strong talent underperforms.
3. What Maximizing Your Workforce Actually Looks Like
If you want to treat your workforce as a growth strategy rather than a cost centre, three shifts matter.
Shift 1: From Activity to Outcomes
Busyness is not productivity.
Measure output. Measure decision velocity. Measure alignment to strategic goals.
When teams know what outcomes matter most, effort concentrates. When everything is urgent, energy fragments.
Shift 2: From Role Clarity to Decision Clarity
Job descriptions are not enough.
Who decides when priorities conflict?
Who owns trade-offs under pressure?
Who protects strategic focus when short-term noise rises?
Execution accelerates when decision rights are explicit.
Shift 3: From Cost Control to Capability Design
Instead of asking, “Where can we reduce expenses?” ask:
Are our incentives reinforcing the behaviour we need?
Is our structure enabling collaboration or creating silos?
Are we investing in capability that compounds over time?
If capacity stretched tomorrow, would your systems increase focus or expose cracks?
That question reveals whether your workforce is optimized or merely managed.
A Different Conversation
There are moments when cost reduction is necessary. Markets shift. Demand falls. Structural changes happen.
But too often, workforce reduction becomes the first lever pulled rather than the last.
Before you ask where to cut, ask a harder question:
Are we extracting the full potential of the talent we already fund?
If the system is misaligned, reducing headcount may relieve short-term pressure while quietly eroding your long-term competitiveness.
Your workforce is not simply an expense to manage. It is an asset to design.
At Sellar Strategic Advisory, this work typically begins with a focused diagnostic that clarifies decision rights, strategic priorities, role alignment, and performance measures, and identifies where friction is eroding margins.
From there, we redesign the systems that drive execution: structure, incentives, leadership behaviour, and accountability.
If you’re navigating margin pressure and deciding between reduction and redesign, let’s have that conversation.
Growth rarely comes from cutting capacity. It comes from maximizing it.
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