What downsizing does to a company

A downsizing is never just a cut in cost. It also removes knowledge, history and a great deal of hidden complexity, and that loss only becomes visible once it is gone. I learned this by doing it.

In 1999 I was asked to go back into a knowledge-management software business after it had gone into administration. I had previously been COO there. The problem was straightforward and brutal: the company had grown its cost base far beyond what its revenues could support, and after the dot-com crash the chance of finding fresh money to cover the gap had more or less disappeared.

Before looking for an investor, I worked out what the company could realistically afford to be. We needed enough people to keep existing customer systems running properly, and whatever capacity was left could go into new development. That meant losing a number of technical staff at both senior and junior levels. I would never describe that process as easy.

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What I got right

I kept people informed throughout. Before settling on the final structure, I spent a lot of time talking to the people in the team whose judgement I respected. The communication mattered. When we reached the announcement there was, oddly, some relief. People had assumed everyone would lose their jobs. Learning that the business had a realistic chance of surviving was not nothing.

The people who stayed were very good. There was a genuine sense of ownership afterwards. They had chosen to be there, in a business they knew was in difficulty, and that created a different kind of commitment from the usual. It was stressful at times, but they pulled together in a way I have not always seen in better-resourced situations.

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What I had underestimated

The codebase was large, and this was 1999, long before any tooling existed to help a developer get to grips quickly with unfamiliar code. In the first round of deployments and maintenance upgrades, we found areas that were significantly harder to work with once the people who had built or maintained them had gone.

That slowed us down and created rework. I spent more time managing customer relationships than I should have needed to, because we were occasionally delivering more slowly or less cleanly than we had promised. We dealt with it by slowing the roadmap, simplifying parts of the product and later rehiring in specific areas where the knowledge gap had become a genuine constraint.

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What leaves with the people

The lesson that stayed with me is this. A downsizing removes the accumulated understanding of why things are built the way they are, which systems are fragile, which customers need careful handling, and which parts of the product will break if touched without an understanding of what is being done.

In a connected-product company, the same hidden knowledge may sit with the engineer who knows which supplier substitutions are genuinely equivalent, the field lead who remembers which fault pattern preceded the last warranty spike, or the technician who understands the diagnostic sequence nobody ever documented properly. None of it appears on a balance sheet. It becomes visible only when it is gone.

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What it does to the people who stay

Redundancy shakes people's sense of professional worth even when the reason is plainly economic and has nothing to do with their performance. That deserves to be said directly, not papered over with HR language. The people who leave did not fail. The situation failed.

The people who stay carry their own weight. Relief, guilt and apprehension often arrive together, and they are asked to absorb more work at exactly the moment the atmosphere is most difficult. Morale is easy to lose here and hard to rebuild. The honest question for leadership is not only what the company is doing for the people who left. It is what it is doing for the people who stayed.

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What actually helps

Sustained communication. Communication before, during and after matters more than most leaders give it credit for. Not a single all-hands meeting and an FAQ document, but sustained, honest conversation about where the business is going and what the plan is. People can deal with hard situations when they understand them. What they struggle with is uncertainty and silence.

Trusted judgement, early. Involving the people whose judgement you trust before finalising the structure is not just good practice. It produces better decisions. The people closest to the work know things about dependencies, relationships and institutional knowledge that are not visible from above. Use that.

Deliberate investment in those who remain. The gaps left by departing colleagues are real. Filling them with development, trust and genuine ownership is both the right thing and the practical thing to do. The team I had after that restructure was smaller than the one before. In some ways it was stronger.

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The broader point

A tech company is not only a business. It is also the accumulated knowledge of the people who built it, and that knowledge lives in individuals in ways that are almost impossible to document or transfer fully. The leadership question in a downsizing is not only how to run the process fairly. It is how to understand what is actually being removed, and whether there is a plan for what happens when it is gone.

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Four things worth taking seriously

For boards: a downsizing plan that counts only cost is incomplete. Ask what knowledge leaves with each role, and what the plan is for when it is needed.

For engineering leaders: before the structure is final, identify which systems, customers and diagnostic routines depend on knowledge held by one person. Expect slower delivery and rework where those gaps open.

For chief executives: keep people informed throughout. Uncertainty and silence do more damage than hard news honestly explained.

For anyone leading the team that remains: the people who stayed are carrying relief, guilt and extra work at once. Invest in their development and ownership deliberately, because that is where a smaller but stronger team comes from.

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If you have been through a downsizing, on either side of it, what knowledge turned out to have left with the people, and when did you first notice it had gone?