Don’t cut costs across the board

In tough economic times it’s very tempting to cut costs across the board.  In the heat and urgency of the moment it’s an easy thing to do. The problem is that across the board cuts will hit areas that negatively impact your clients.

Here is one example of an impact that is often not given sufficient consideration before deciding where to cut. When a business implements cuts the affected staff get de-motivated and incapable of delivering the level of service that they did in the past. Add the negative impact on customers and staff together and you end up with loosing customers through poor customer service and lack of attention to detail. In the worst cases this can be the start of an out of control spiral.

How to mitigate this risk

One way to reduce the negative impact on the business of necessary cuts is to ask some simple questions at the start of the process around each main areas of cost. The risk associated with each cut can them be given simple risk impact ratings which will help prioritise cuts and create implementation plans.

The same type of process can then be used throughout the organisation as cuts are implemented.  The simple questions provide a touch stone to test decisions against and also a way of ensuring that functions make the appropriate and best decisions that they can.

Here are some examples of the types of questions to use.

1. How will this action affect customers?

2. What opportunities do we now have to do things differently?

3. Is there a more economic way of delivering what customers really want?

This is not an easy process and can be very painful for the business. However across the board cuts will be even more painful.  To make the process work well it must be managed by a someone who is able to understand the business but also be dispassionate about where cuts are made and not have a vested interest to protect.  It also has to be done quickly. Most companies do not have a person who can do this on their own and therefore need a suitable external consultant to help them.


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