Our principal, Sandy Huang, contributed to December 10, 2013′s issue of BIV’s Ask the Experts on issues to consider when cutting costs.
Companies typically cut costs to improve efficiency or save money in a challenging business environment. But cost cutting isn’t just a decision executed according to black-and-white criteria; it’s an art form, the success of which depends on many factors.
Three elements to keep in mind:
Ensuring business continuity: All businesses, no matter the size, have management, mainline and support functions. Management functions provide company oversight, mainline functions support the delivery of product/service, and support functions improve the performance of mainline functions. Decision-makers must understand each cost-cutting item’s role within the organization and ensure that potential cuts will not have a negative effect on company integrity or its ability to provide service to customers. Cost cutting should never be a knee-jerk decision.
Seeing the forest for the trees: It can be tempting to cut initiatives that only return long-term results. These initiatives are often strategic and take time to nurture but are vital to achieving big-picture goals. Companies that fail to plan for the long term may become directionless or even implode after experiencing a period of unexpected growth that they couldn’t manage. In tough economic times, an in-depth understanding of company goals provides the insight to “see the forest for the trees,” drastically reducing the danger of making decisions that will be detrimental over the long term.
Boosting staff morale: Cutting costs sometimes means letting go of things or people who have been integral to an organization’s development. Employees are arguably a company’s most valuable asset, and cultivating a trust culture through effective internal communication is paramount. When experiencing loss or change, staff must be kept informed and encouraged to engage in the process. A supported, happy team is often the difference between a smooth company transition and a disaster.