Tips for leaders faced with radical layoffs and revenue reduction
What should leaders do when their organization is faced with a sudden and radical reduction in revenues?
Businesses and nonprofits dependent on federal funding and contracts, or with missions that immediately shift from popular to rejected, wake up one day with what might be the most difficult decisions of their career. There are few choices, and several mandatory responses if their organization is to survive.
After a 50% or more revenue reduction, leaders need to prioritize critical areas to facilitate a smoother transition, ensure the organization remains operationally able if not robust, and support remaining employees effectively. Nonprofit Quarterly’s When Pivoting in Times of Crisis, What Should Small and Medium-Sized Nonprofits Prioritize First (December 11, 2025), asserts that staff separations and office space should be the first to go.
Once the decision is made to continue operations, if continuing is still an option and leaders have the fiber and fight for it, leaders should focus on:
1. Essential operations only (people, money, and programs)
2. Process evaluation (streamline and simplify)
3. Culture maintenance (communications, trust, feedback, care)
4. Planning (new strategy, upskilling, role-redefinition, succession preparation)
The response to radical reductions is not simple, easy, or — if you care about your fellow humans — without significant emotional distress. It is helpful to have a roadmap for what to focus on to get started down the road to change, while you still have time to save the organization.
Communication and Transparency
Open Channels: Foster an environment where employees feel safe sharing their concerns and feedback.
Frequent Updates: Regularly communicate changes, expectations, and progress to keep remaining staff informed and engaged.
Employee Morale and Support
Wellness Programs: Implement mental health and wellness resources to support employee morale.
Recognition: Acknowledge the hard work and contributions of remaining staff to boost engagement.
Redistribution of Responsibilities
Role Clarity: Clearly define new roles and responsibilities to prevent overlap and confusion.
Training and Development: Offer training to help staff adapt to new roles and improve skills.
Operational Efficiency
Process Evaluation: Analyze workflows to identify inefficiencies and streamline operations.
Technology Utilization: Leverage technology and automation to manage workloads effectively with fewer people.
Strategic Planning
Focus on Core Objectives: Ensure that organizational goals align with the current resources available.
Adaptability: Stay flexible and ready to pivot strategies as market conditions change.
Building Trust and Culture
Culture Reinforcement: Work on maintaining the organization's culture, emphasizing core values and mission.
Feedback Mechanisms: Establish systems for regular feedback, ensuring that employees feel their voices are heard.
Financial Management
Budgeting: Reassess and adjust budgets to reflect the reduced workforce while maintaining essential operations.
Investments in Growth: Identify areas where strategic investments can lead to growth opportunities despite the downsizing.
Expecting that you will have all the information you need and a long runway to make decisions is unrealistic in a crisis. Delaying may help you feel protective of your organization and people, but a leader’s stewardship of the organization still requires vision and implementation, even on this unplanned, unhappy journey.
As leaders, we tend to focus on money, because it drives everything. This focus is critical. However, the importance of trust and communications with your people during this and other times of crisis can not be overstated. And the way to get your trust environmnent ready for crisis response is not what you might think. Brendan Monahan suggests, in Strategic Corporate Crisis Management (2023), that psychological safety and the “no fault baseline” are most important, and let employees know that they will not be admonished or blamed for missteps as they attempt crisis progress not perfection.
The goal is not perfection, but to plan and carry out this change process well, before the organization declines beyond repair.
People are the only levers for ensuring your emergency response and recovery move forward, and people will carry out plans with flexibility and resilience, in a culture of trust and care. If this did not exist before, now is the time to start. If you are unaccustomed to creating a culture of trust and care, put someone in charge that is.
This will help you lead your organization to the other side of the crisis with your humanity intact and stakeholder support for ongoing change needed to thrive again.