It was early in my career when I was called to a special meeting in the office of Kathy, whom I reported to. Soon our entire team was in her office, and she delivered news that I heard for the first time. “Effective today, Mr. Dawson (not his real name) is no longer with the organization. He is pursuing other interests.” That was a surprise to me, I didn’t see that one coming and I don’t think he did either, or if he did, he never let on to anyone. I don’t know if it was a personality conflict with his leader, a lack of value added or economics. My hunch is it was value added because he was replaced. He had created a unique organizational structure, with only one person, Kathy, reporting to him and everyone else in the division reporting to her. Today in looking back, I’m guessing someone determined his value was to the organization wasn’t worth his salary.

Unexpected job losses happen every day across this country. Annually there are over 20 million layoffs, job eliminations and discharges in our country. That’s a bigger number than most of you reading this would imagine. If organizations were honest, you’d learn some job eliminations are personality driven, some performance driven that may have never been addressed so a job elimination became an easier route, but whether it’s said or unsaid, the most common reason is economic, i.e., saving money. The bigger your salary is, the bigger the savings. When I began my career in human resources, I never anticipated I’d spend as much time as I did on job eliminations, layoffs and organization “restructuring.” As I reflect on all the job losses I’ve been connected to, including my own and stories I’ve heard from others, there is something I learned earlier in my career that is worth sharing. You must:

Know how your organization makes money.

Organizations exist to make a profit, and profits will go up and down based on the economic conditions around them. It won’t always be as good as it might be today. We can argue how much profit is too much, there are plenty of opinions, but at the end of the day if you don’t make money you won’t stay in business.

When profits are falling, there are two main levers to pull.

1. Grow revenue
2. Reduce expenses

When reducing expenses organizations often choose what they see as their biggest variable expense, employees. I have never liked this, but I understand it. In eliminating jobs, they look for jobs in their organization which they believe they can do without and have the least impact on their profit.

Learning how your organization makes money is relatively easy, just ask. Talk with your supervisor or go visit the finance department.

Then, look at your work and ask how it helps add value toward profitability.

Does your work help:

• reduce expenses?
• increase revenue?
• reduce risk?
• improve operational efficiency?

Let your knowledge of organizational profitability and value be a filter for your career.

Remember, things that are “nice” to do, feel good, but they rarely survive difficult financial times. Things that add value to profitability survive.

Throughout your career, you might be able to make recommendations for new initiatives or consider proposals of others. When you do, look for “line of sight” to profitability. Constantly ask questions like these:

• Does this grow revenue? How can we measure it?
• Does this save expense? Is this a one time or ongoing expense savings?
• Are we reducing risk? What’s the cost of the worst-case scenario?
• Are we creating efficiencies? Can we quantify them? Is the cost to get the efficiencies greater than what is saved through efficiency?

The answers to these questions will give you guidance to move forward or not.

There are no guarantees in life and knowing how an organization makes money won’t protect you, but it’ll give you a leg up on many of the other people you work with who have no idea.

Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: Wisdom preserves those who have it. Ecclesiastes 7:12