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Saturday, November 22, 2008

To Cut or not to Cut

Yes, it's that time again. Many companies all over the world are jittery because of the economic troubles that are going on.I've been asked several times by other HR Managers about my own cost cutting measures. They are obviously looking for best ways to do it. At the time I was asked, I was not seriously thinking about cost cutting and besides, I probably have one of the leanest companies in the world, there's hardly any fat to cut except the one around my belly so I guess I was the worst person to ask.

And then it dawned on me. Everyone is in danger of getting hit by this economic crisis including me! It happened when two friends who were very marketable training professionals complained about the slow business. Two clients for executive search was told by top management to take it easy with the headhunters. It sent shiver down my spines! I asked myself, should I cut cost just like what others do? Didn't I say that if I cut any further, I'll be slicing through the meat of my operations? How do I maintain competitiveness and profitability at this challenging times when there is hardly any cost to cut? I think this is an important question to ask especially for those in the same situation as I am or maybe even those whose default reaction to this type of situation is to "cut cost".

I always believe in choices. If going left doesn't look promising, I can always choose to go right. If I can't cut cost, I can choose to focus on PERFORMANCE IMPROVEMENT instead and be more aggressive in pursuing revenue generation. When I say aggressive, I mean rallying the team to be more resourceful, creative and productive. They need to understand that this is a better option to the usual cost cutting measures that usually involve shelving training initiatives, freeze hiring and canceling employee events which are likely to cost the company more than it actually saves.

Challenging times like this is like creativity fodder. When people smell danger, they are motivated to act and I believe managers should capitalize on this. I have since talked with my team about ways to improve our processes, hasten delivery without sacrificing quality, think of other revenue generation measures, evaluate our current services and direct our energies on works that matter. It has resulted in new ways of doing things. The jury is still out on whether what we've done is actually making a difference but we're not letting up. We meet more frequently to assess if any of our strategies are working.

I also fully realize that telling them to be better won't make them. They need training. Cost? no, investment which when managed well, will produce revenues and profits. Managing your training investment well means following through which many managers often fail to do, that's when training becomes cost. If you want training to return your investment, read my past post on this topic.

I also realize that aggressive operation require aggressive people. If there are people in your team who are genetically passive and therefore don't match the needs of the time, you'll need to make a tough decision. Hiring additional people may probably increase your cost but enable you to deliver more in terms of revenue. a knee-jerk, freeze-hire reaction might not help improve a company's lot.

Times like this turn many managers "penny wise, dollar stupid. They start penny pinching on employee welfare and lose good employees in the end. Yes, it's usually the poor ones who are hard to shake off. My suggestion is to not cancel employee events altogether but to be more creative and find more cost effective ways of carrying out events. Also, develop results oriented rewards program that will motivate employees to contribute to company profitability. This is the worst time for low employee morale. You need your employees coming to work and working hard. In order for that to happen, they should be happy with their job, their co-workers and the company they work for.

To cut or not to cut, I guess the answer is not clear cut. The same universal rule of cause and effect applies. As a manager, you need to establish the right "cause" that will drive the desired effects.

1 comment:

  1. You are right there sir, everybody is getting affected with this economic crisis.. A lot of workers are being jobless becAUse of cost sutting procedure of companies.

    by the way, i am following your blog now. will come back to read some more... keep up the good job!


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