A critical mistake in the past that I’ve made with my business was making difficult decisions early. One example was at a point of accelerated growth in my agency when I hired talent for a few large contracts that I acquired. Soon after, I had a few key clients announce their departure. Always the optimist (as most entrepreneurs are), I thought if I just hit my sales harder we could recover.
As the leader, I felt responsible to my employees and their families so I scrambled to go find business and try to fill the revenue gap. It led me to hastily sign clients outside the cultural and talent fit we typically engaged in. The result was that I went deeper into debt; my employees were unhappy, and the new clients weren’t seeing the quality of work we had a reputation for delivering.
Worst of all, it still required that I lay off employees. That wasn’t all, though. I damaged our culture, our reputation, and our bottom line. It was an excruciating lesson to recover from. Ultimately, we did recover, but the lesson has stuck with me.
Leaders are often faced with the unenviable task of making hard decisions. These decisions usually boil down to a critical choice: endure short-term pain by cutting losses now or prolong the agony in hopes of a miraculous turnaround. Ironically, many leaders choose the latter—not because it’s the better strategy, but because it avoids immediate discomfort. The paradox is stark: by attempting to sidestep short-term pain, they often magnify their long-term suffering.
The Allure of Prolonging
Why do so many leaders hesitate to make decisive cuts? For one, there’s a psychological attachment to past investments. Known as the sunk cost fallacy, this bias leads decision-makers to pour additional resources into a failing endeavor simply because they’ve already invested so much. Leaders may also fear immediate backlash from stakeholders, be it employees, customers, or shareholders. Explaining layoffs, closures, or canceled projects is daunting—and understandably so.
Another factor is the culture of optimism that pervades many organizations. Leaders are often celebrated for their resilience and ability to inspire teams to persevere through tough times. While these qualities are admirable, they can become detrimental when optimism clouds judgment. Holding out hope for an unlikely rebound can feel like courage, but it’s often a recipe for disaster.
The Case for Cutting
Conversely, cutting losses requires emotional maturity and strategic foresight that distinguishes great leaders from the merely good. It demands a willingness to confront harsh realities and act decisively in adversity. While the immediate pain of letting go—laying off staff, terminating a failing product line, or exiting a market—is undeniable, the long-term benefits can be transformative.
Consider the business leaders who’ve boldly navigated downturns by cutting deeply and early. During the 2008 financial crisis, some of the most successful companies thrived not because they avoided cuts but because they made them swiftly, ensuring their survival and setting the stage for future growth. Painful as it was, their decisiveness allowed them to reallocate resources to more promising ventures, pivot strategies, and emerge stronger.
The Long-Term Pain of Procrastination
Ironically, the pain leaders try to avoid by prolonging decisions often worsens exponentially. Delaying necessary cuts can drain resources, erode morale, and diminish competitive positioning. Employees sense when a company is struggling and leaders are reluctant to act, creating a culture of uncertainty and disengagement. Customers and investors, too, lose confidence, exacerbating the downward spiral.
Moreover, procrastination can mean missing opportunities to adapt to a changing market. Resources tied up in failing projects are resources not available for innovation. By clinging to the status quo, companies risk irrelevance, leaving them ill-equipped to seize new opportunities when they arise.
Takeaways
To navigate the cutting vs. prolonging dilemma, leaders need a clear framework for decision-making:
- Face the Data: Set aside emotions and focus on objective metrics. What do the numbers say about the viability of a project, product, or market?
- Define the Opportunity Cost: Consider what you’re sacrificing by continuing on the current path. What potential growth areas are being neglected?
- Communicate Transparently: If cuts are necessary, communicate the rationale clearly and empathetically. Stakeholders are more likely to support difficult decisions when they understand the why.
- Act Swiftly: Once a decision is made, execute it decisively. Lingering uncertainty only compounds the pain.
- Learn and Rebuild: Use the experience to refine your strategic approach. Painful decisions often yield valuable lessons that can guide future success.
Leadership isn’t about avoiding pain; it’s about navigating it wisely. While the instinct to delay hard choices is natural, it’s often a false comfort. The irony is that the pain leaders dread in the short term is often far less severe than the prolonged agony of inaction. By embracing the discomfort of cutting when necessary, leaders preserve their organization’s viability and position it for long-term growth and resilience.
Great leaders understand this fundamental truth: the path to success often requires stepping into the storm, not running away from it.
