Sunday, November 22, 2009

Cost Cutting for Companies– Bullet Points

We have written a number of articles about cost cutting for companies. The articles have covered companies in a variety of industries and situations. They have summarized best practices and you can read each one of them here on this blog. Cost cutting has become a major focus for most companies.

I am often asked for some bullet points about cost cutting. I could say:

These are bullet points but not very helpful.

Cost cutting is not about bullet points. You need a much fuller understanding. Bullet points, like those mentioned, are like giving you some general comments about how to build a house and expecting you could go off and actually build one.

You need a much deeper understanding, along with a mentor, advisor, coach, consultant etc. who really knows what they are doing

What is the most appropriate direction to give to you regarding cost cutting? That will depend upon your company’s objectives, what is needed to achieve those objectives and where you currently are in both the business and the costs you have already cut. It has to start with the plan.

What is your business plan? What are you working to achieve and what are the key elements required to enable you to achieve the goals? What are the interactions, such that costs that are cut in one area do not negatively impact other areas? Often changes can cause unanticipated consequences in other functions and processes that cause even more damage. Without a practiced eye to monitor the changes, many companies end up worse off after the cost cutting than before and they spiral down in revenue and financial measures.

What is the impact on your organization? What skills and talents are required and what do you give up in cost cutting? Most companies start their cost cutting with cuts in employees. They often go for the older employees since they tend to have higher salaries. The problem is that the companies are also cutting experience and knowledge that can drastically impact efficiency and effectiveness throughout the organization. Once the “internal IP” that is in the mind of the seasoned employees walks out the door, much is lost and it is very expensive to regain it.

Cost cutting alone is never the correct way to right size a business. Thought and planning must also go into reigniting the growth of the business. That is why the plan and the organization are so critical. Without them the company will continue to flounder.

If I were to comply with the original request for bullet points on cost cutting, I would offer just one.

*** Contact me and I can help you.



John Maver
Maver Management Group
(925) 648-7561
Maver Management

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