We all know times are tough and many companies are embarking on cost cutting exercises. Unfortunately, this is a necessary procedure but think of the impact on staff morale and the potential loss of productivity when undertaking cost reduction. You don’t want to end up leaving your business worse off.
A few tips
- Communicate effectively. Cost cutting is not a pleasant experience, so be open with staff – why it is necessary, how much you plan to save and how this exercise will make the business more sustainable.
- Be fair. If you plan to stop business class travel for some employees but keep it for senior executives think of the possibility of staff resentment and the potential for an “us versus them” situation to develop.
- Keep perspective. A company recently stopped funding junior staff’s cell phones. Not only did this cause widespread anger but the actual saving was too small to have a real impact on reducing expenses.
- Think it through holistically. In another example a business made significant cuts to travel expenses and used video conferencing for team members to communicate with each other. This reduced team ethos, effectiveness and productivity was lost.
- Think of the side effects. In another travel cost cutting scheme, staff were not allowed to use taxis. This, in effect, stopped travel after hours as staff then opted to travel during business hours. Thus, the company lost up to two working days a week when staff undertook business trips.
- Don’t skimp on contractors – such as not letting them use your canteen. They do important work for your company, so don’t put this at risk by treating them badly.
Use common sense as your guide when you undertake cost cutting.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)