When the numbers turn, the first meeting is usually about headcount. This week, a CEO said out loud what most leaders never say: layoffs are a choice. If you want to understand employee retention, start with what she cut first.

What happened

Melanie Dulbecco has run Torani, the San Leandro, California syrup maker, for 35 years. Torani has about 500 employees and expects more than $800 million in revenue this year. She told Business Insider, “I think layoffs are a choice,” and says her company has kept everyone through the 2008 recession, automation and the pandemic. IBTimes UK has the interview, and Fortune profiled the company in September.

The timing matters. On October 14, Netflix announced it was cutting nearly 1,000 jobs, about 6% of its workforce, while its co-CEOs wrote that business is strong, according to the AP. I am not judging Netflix. I do not know its books. I am pointing at the contrast, because it shows two ways to answer the same question.

The order of operations

Here is what stood out to me. When COVID hit in 2020 and April sales fell 20%, Torani did not start with people. As IBTimes UK reports it, the company cut marketing and advertising, paused business travel and pushed harder on online sales. Revenue still grew 15% for the year.

Dulbecco is not naive about it. She grants that a company headed for bankruptcy may have little choice. But for everyone else, the point is the order. People come last on the list, not first.

In the SEAL Teams, when a patrol got heavy, we dropped gear before we ever dropped a man. Gear is replaceable. People are not.

That list is a contingency plan

Notice what Torani did not do. It did not invent that list in the middle of the crisis. Fortune reports the company modeled financial scenarios to avoid layoffs. In SMACCC, the planning process I ran in the Teams and run with CEOs now, that is the Contingency step: for every action, ask, “What will we do if…?”

Most leaders never ask the question about money until the drop has happened. Then the only lever in sight is payroll. It is not the best lever. It is the only one with a plan attached.

Employee retention is built before the crisis

There is a second payoff, and it is the one that shows up in your employee retention numbers. Dulbecco argues that job security builds trust, and that trust makes people more willing to take on new tools, AI included. Fortune reports she treats AI as more than a cost-cutting tool for exactly that reason.

People give their best effort to leaders who keep faith with them. Your team watches what you protect when things get tight. If the answer is always them, they stop giving you their best. If the answer is everything else first, they learn what kind of leader you are before the crisis ever arrives.

When a layoff really is the answer

Sometimes the math is the math. If you have run the list and the company still cannot make payroll, cutting people may be the only way to save the rest of them. If you get there, do it with respect. I wrote about how to let someone go with respect and about how to fire someone when the decision is about one person. Do it once, do it honestly, and tell people the truth about what comes next.

Apply it this week

1. Open a blank page. Title it “What we cut before we cut people.”
2. List ten line items in order. Ad spend, travel, events, contractors, vendor renewals, whatever fits your shop. Put the first things you would give up at the top.
3. Put a dollar figure and one name next to each. A number and an owner turn a hope into a plan. Then put a date on the calendar to review it.

You will not control the market. You do control the order. Decide it now, write it down, and your team will know where they stand long before the numbers turn.

Keep your eyes on the target. — Errol