A Better Way to Cut Costs
A Better Way to Cut Costs
In response to the global situation, and more specifically the regional challenges they are facing, almost every company is implementing cost cutting initiatives. But less than 5 percent of those companies are doing it in the right way! Even more troubling is the fact that the vast majority of people in those organisations have no idea what measures they should take in order to cut costs in a way that 1) saves the business money, and 2) does not have a negative impact on the company’s ability to be profitable and successful.
Far too many times companies that cut costs go about it completely the wrong way, with the result that one or neither of those goals are achieved.
There is a better way however.
Three essential steps for cost cutting
- Review the existing strategy from top to bottom.
- Focus solely on value driven activities.
- Merge functions/departments that overlap or can work together
Cost Cutting General Solutions
A successful cost cutting strategy focusses on the long term, not merely the short term. Otherwise, money saved now could very well end up costing the company far more in months and years to come. Some of these are overlooked because on the surface there does not appear to be an obvious saving, but if implemented correctly, very quickly you will see significant savings.
- Invest in technology: The correct technology will make every department run smoother, and more efficiently.
- Merging premises: It is a very good way for quick money saving.
- Telecoms systems and healthcare contracts: Negotiate for a better deal, or shop around for the best package for your business at the best price.
- Hire fresh graduates: As this hiring is cheaper and assign them with mentors from the business while carrying out the clean-up exercise detailed below.
- Undertake a 4 stage clean up exercise of your current workforce:
- Clear out all toxic elements: Once this has been done, the working environment will improve drastically, which will in turn have a positive effect on performance.
- Retire employees nearing retirement age.
- Cut those employees who are under performing.
- If the above three measures show that you still have to further reduce, then redundancies are the next stage. These should be done across all levels and all departments of the organisation.
Personally, I haven’t come across a business that is operating a creative cutting cost strategy yet. Instead, the two strategies that are all far too common are: reducing employees’ salaries, and getting rid of top performers!!
Always remember that the cost of an un-motivated workforce in the long run, is considerably higher than any short term cost savings you may achieve now.