I hate laying people off. I think everyone should. But recently I worked with a company that suffered from a lot of internal demons and an unpleasant, unproductive culture. It occurred to me, listening to the COO recount the company's woes, that the company had too many people and too little work.
What were the signs?
Whenever a new project emerged, everyone wanted to take charge of it. The COO spent a lot of time adjudicating. Sometimes this meant a wide range of potential solutions but more often it was a power grab. That people were willing to waste a great deal of each others' time suggested to me that they had too much of it.
Posturing for credit.
Every successful initiative seemed to me to have a very large number of people claiming credit for it. That implied that they didn't have enough of their own work to celebrate. How come?
This company seemed to be full of people who could find fault with every department apart from their own. I wondered how they knew, and why they cared.
I concluded that, because there wasn't enough work to go round, ambitious clever people wound up squabbling over what work there was. Too much time and effort went into in-fighting and not enough into innovation. Nobody was stretched--or challenged--enough.
I recognize that during days of austerity this seems like an odd situation to encounter. But it had come about because a benign management had added people as the company grew. The growth made employees affordable so management had no reason not to hire. Nobody had stopped to think that maybe those who were already there could--and needed to--do more.
I've seen this phenomenon quite often. Really smart people want to be busy, to stretch, and grow. Management's job is to give them a little more than they can handle--not to save money, but to keep everyone fully engaged.
If your company is riddled with politics, one way to change things is to get everyone a very great deal busier.