Downsize today: while thinking about tomorrow: today's economic realities are forcing many firms to shed jobs and space. Those that consider the whole picture--the people and real estate--can smartly cut and maintain productivity while simultaneously creating an environment for when the recovery comes.

Since employees and real estate are a business's largest expenses, the current deepening economic downturn is driving many companies to choose between reducing jobs, adapting space or both. Indeed, headlines chronicle massive job cuts, forced retirements and layoffs by the thousands--in efforts to bring operating expenses back into balance with profitability.

Real-estate issues--while they don't often make the front page--are a prominent part of the same crucial drive for liquidity.

To be sure, cutting staff and space are urgent measures designed to address urgent financial issues. But it's important to not compound the problem of massive sudden change by acting without consideration for the short- and long-term consequences of such actions. Often such "slash and burn" tactics prove to be a massive waste of time and money.

Effective downsizing is not just calculating how many people to cut or how much space to vacate. The goal is to make reductions without affecting the organization's capabilities and productivity. It's also smart to keep an eye on recovery somewhere down the road.

The biggest obstacle to this approach involves emotion. Job cuts and real-estate downsizing always create emotional storms within an organization. Employees being let go are naturally concerned about their livelihoods and futures.

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Those who escaped the cuts may feel relieved, but they're undoubtedly anxious about their own futures. They still have a job, but that job is more demanding with the same workload falling on fewer shoulders.

If space planning was not addressed effectively, they may be doing their job in a "twilight" workplace among the empty workstations of their former colleagues. And hovering over it all hangs the unanswered question: "Will I be next?"

Even those executives making the downsizing decisions are not immune to the jitters. A well-run organization can feel like a family. When that community is shattered by layoffs or drastic cuts, there's a common feeling that all bets are off. This can play havoc with performance, just at the time when the company needs to be more productive than ever.

All of these considerations illustrate why it makes sound business sense to consider expert help for managing downsizing projects. It's often easier for an outsider to clearly assess the actual value in situations in which insiders are blinded by company conventions.

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Outsiders aren't constrained by concerns that "the CEO won't like that," or "we can't change it because we've always done it that way."

It's also easier for an outsider to make the hard recommendations. There are many companies that lack the strategic business perspective to go it alone. Their departments are staffed with people who haven't lived through hard economic times or ever had to make such types of creative or resourceful decisions for managing a workforce, facility or real-estate portfolio.

Space/Design Change Agents

Space/design experts with extensive business experience who make the best change agent partners will not stop at assessing a firm's needs from a conventional business perspective. They are equipped to perceive all kinds of value in facilities: how valuable space is to an organization, how strategic is the location, how the space enables internal business functions and relationships and more.

Whenever working with outside consultants, due diligence is necessary. The process team's plan should include these four basic elements.

1. Reevaluate portfolio holdings. This includes the basics such as analyzing leasing versus owning in the portfolio and determining how adequate flexibility will influence the balance sheet. Assets and asset quality should be evaluated, and the question must be asked if employees are in the ideal location/building for maximum efficiency. Also, on a glob al basis, examine locations and location synergies with factors such as employee commutes, customer use and marketing strategies in mind. Do the current locations aid or fight these necessities?

2. Safeguard workplace culture. The quality of the workplace and the workplace culture is paramount to maximum productivity. Keep this essential at the highest-priority level throughout the downsizing process.

3. Invest in change management.

A company must be willing to make the investment in a productive change process by making the changes transparent. It's also crucial to communicate effectively with the workforce, enroll their assistance and manage their expectations.

4. Plan for recovery. Downsize with the assurance that the upswing will come. Cutting indiscriminately or too far will not be helpful in the long run because firms eliminate the resources and talent needed when the market inevitably rebounds.

Positive Changes

Off-the-balance-sheet factors can ultimately help a company use its real estate (space) and people more efficiently. Architects, interior designers and facilities consultants understand that the value of a property is all about the way it's used. A space/design expert can determine the most productive way to use space for specific operations. The results of that efficiency do end up on the balance sheet.

Based on an organization's specific situation, a design expert can help to consolidate operations for efficiency. Even if a large company has long-term leases that can't be broken, it's still possible to consolidate space and reduce costs by organizing certain operations together and by taking into account the best functional location of the business.

Large organizations that need to cut space always have multiple options. Shuttering a leased facility completely, for example, can be an enormous cost saver as well as eliminate energy, janitorial and custodial services for those locations.

Or, if a corporation owns property in an underutilized portfolio, consolidation into fewer buildings can significantly reduce its cost structure. One option is to lease the underutilized space to create a revenue stream; another option is to sell the building and generate considerable property tax savings.

Engaging in such a process can also help facilitate stakeholder decision making. Companies have a range of stakeholders: employees, executives, stockholders, communities, etc. When downsizing, it's important to facilitate a process to align all interests and build consensus on downsizing decisions.

Companies can consider flexibility in the form of alternative working strategies, such as mobility programs. Most companies already have an inherent mobility; employees already conduct business by laptop, BlackBerry and videoconferencing. Taking that to the next level of telecommuting programs has been shown to save enormously on real estate and generate higher employee satisfaction.

The communications company SprintNextel Corp. generates $80 million in savings annually through a space-shedding "Work Anywhere" program. Employees are just as productive, but their job satisfaction has soared.

SprintNextel's program also helps the environment by using fewer buildings and less space, thus eliminating emissions. (Fifty percent of the carbon emissions in the United States comes from buildings.) Eliminating the commute for employees cuts employee auto emissions as well.

While aiming to maintain productivity throughout the downsizing process, it's important to consider employee morale. There is nothing productive in having 100 employees function in a space designed for 300. Maximum productivity requires a positive environment that is vibrant and has critical mass.

There's no way to totally protect the impact of downsizing--it's always difficult. But firms can control and manage the level of difficulty management and employees face on the way to a smaller, more effective and productive workforce.

BOB PRATZEL ([e-mail]) is CFO at HOK, one of the world's largest architectural/engineering firms. STEVE MORTON ([e-mail]) is a director of HOK's Advance Strategies business unit, which helps companies align business strategies with real estate, facilities, workplaces and information systems.