Redundancies. Downsizing. Maximizing Value. Corporate Restructuring. Business Efficiency. Cost Reductions.
A few phrases that often fill us with dread. You’re either on the handle end of the metaphoric axe, having to make value choices between laying-off employees (or ‘closing positions’ – to use the cost cutting parlance) or you’re on the blade end. You are the one being cut (or your budgets or services are). Throughout my career, I’ve been at both. In fact, I have left more organisations through redundancy and restructuring than I have for any other reason; hence writing this blog to breakdown some of the issues around cost efficiency measures.
In the old days before political correctness, it was called ‘trimming the fat’. The implication being that the company could operate better, healthier if it were leaner… literally. Lean process quality management systems have been employed around the world in various guises to streamline businesses – increasing productivity, maximising quality and reducing waste. Looking back, there were the inspectors who checked and passed everything before it left the factory, then good old BS5750 – the British Standard for quality assurance or ISO9000 for the International one, then Concurrent Engineering, Lean Systems, Kaizen, Continuous Improvement, Six Sigma, Design for Six Sigma!
I often wondered though (just like with those washing up liquid adverts) if the first formula was as good as they said it was, why do we need the new improved version? I’m not knocking any of these process improvement methods – after all I’m a qualified Six Sigma Black Belt (look it up if you’re really curious). I’ve even run courses training others to define, measure, analyse, implement and control problems. Ultimately if the tool is not the problem, it must be to do with the process you use to solve the problem. Swinging a big axe around your head won’t help you unless at some point you strike the right thing in the right way; and the theme of this blog – demystifying job cutting.
What I have learned through experience, on both sides of the axe, is whoever is making the decisions needs to know how and where to wield it. I use the analogy of going on a diet in order to lose weight so you can visualise what I mean. It seems a little crude considering our earlier ‘trimming the fat’ expression; however the illustration is more than effective.
Cuts are not a cure. At some point your business was deemed to be healthy, or at least healthier than it is now. As the person in charge of making cuts, it is important that you truly understand the objectives of what you are trying to do. A 12% budget reduction across all departments is not an objective. That’s a target. In the same way, most of us wouldn’t start out on a diet trying to lose 20 kilograms evenly distributed across our bodies. Some areas need more, others need less. This is why ‘salami slicing’ (taking small proportions from every area of your business) has a limited effect. There are parts that are doing fine and are quite peachy thank you very much. If you are going to swing the axe, appraise your business holistically. Know what needs more and what needs less. In some cases, even the slightest cut has very significant consequences. This is also true when reviewing our personal finances; some expenditure can be halved easily (like your satellite TV package), others like your mortgage can’t.
Reduction isn’t always the right answer. Surprisingly, diets don’t only mean eating less. There are types of food and drink of which you might have to increase your intake. Yes to grilled chicken, nuts and eating more meals during the day, as long as it’s not the deep fried or honey coated kind and eaten in moderation. Often it involves a greater investment of time to prepare meals rather than cheaper convenience foods; or buying relatively expensive supplements or diet shakes. The same is true with your business. The key to making yourself more productive or competitive might be to invest in a new area or renovate an existing one. Surprisingly, when used as part of a well-thought out strategy, opening up some of the types of work you do could be more lucrative for you. A little short term pain might produce better in the long term than savage cuts. Why not increase the offer of your best-selling line or service? It’s already working, right; so how else could you make the most of it? After all just because it is working well today doesn’t mean it will always perform this way.
It’s what goes in that counts. It is always more effective to review the inputs of your process rather than look at what comes out the other end. I’ll skip the dieting analogy on this one… for obvious reasons. Needless to say, analysing the way a department is working might be a better option than cutting the budget. By that I mean productivity is more than how much they are producing or how much they are spending. The people in those teams are probably going to thank you for asking them “what could make your output better, cheaper and more efficient”. One of the companies I worked with had a massive problem with unresolved invoices. They had a large amount of money due to come in but it had never arrived. It didn’t take long to work out that the process for delivery notes had been the casualty of an office move. These remittance notes which would trigger the invoices were sitting in an in-tray on the old desk waiting to be action because the person whose job it was had left and the new person hadn’t been aware… you can imagine the rest. That was $400,000 worth of invoices outstanding because of a duff process. Oh and I have more stories like that – like the faulty photocopier that ate up 1.5 people on the headcount every month!
Cherish your improvement. It doesn’t make sense to do all that work getting a new, lean body and not taking care of it so it stays that way. Love your new process and improvements. Bear in mind that whatever you change, invest in or cut will need to be maintained. Otherwise you will need the ‘new improved version’ every time there is the next round of corporate restructuring. It is worth noting what it will cost to sustain your new body or business. How will your diet change after you’ve reached your target weight? What kind of exercises will you need to do and how often? More importantly, how much will it cost? This is the hidden expenditure that we often overlook but without it we yo-yo from fat to lean to fatter to lean-ish. Like us, organisations can become complacent – “I’ve dieted before so I can do it again”. This may be true but it’s harder to achieve the same results the second time round. You’ll have less resources this time and possibly a waned incentive.
Ultimately, most businesses do have to be competitive. In order to do that you might have to cut costs and make improvements. Our recommendation is not to do it alone. There are many who have been through it and survived. Their experience is invaluable. If you happen to have a workforce or even a small team who care about your business, we promise you can find ways of making the whole thing a lot simpler and a lot less painful than it needs to be. If you would like to chat more about how Ideas Genius can help your business improve contact firstname.lastname@example.org.