How to cut back when you are doing well: cutting costs with happy teams

The majority of the world is feeling the pinch. Rising costs and reduced customer spending is leaving companies in a steel-sided sandwich.

How to cut back when you are doing well: cutting costs with happy teams

The majority of the world is feeling the pinch. Rising costs and reduced customer spending is leaving companies in a steel-sided sandwich. But some companies are still doing well while others still have strong sales but problems elsewhere.

We are seeing the devastation of mass layoffs even in the previously hallowed ground of tech. Some have been handled with considerably less than civilized acceptability: think group layoffs and layoffs by zoom in particular. While far from pleasant, there is a way to make people redundant. If anyone saw the film “Up in the Air” with George Clooney, slick, fast, solutions aren’t it. You are dealing with real human beings with very real worries. There is still a huge shock value involved. even alongside an expectation. It is usually evident to the people working there when companies or sectors are performing badly or losing money.

What can be even more challenging to get right, is making cuts of any sort when a company appears to be doing well with sales. Rising costs are not so evident to the people working there – bar the accounts department. There is also often a general assumption that companies have fat profits and deep pockets by their very existence. But tucked away in the offices, the “suits” see the soaring costs, watch their sector’s problems hacking through competitors’ profits, and feel the tremors of an unsafe global economy. Not surprisingly, they want to cut costs, if not in headcount, in terms of unnecessary spending.

It sounds like a totally wise move. As those who have been through this exercise will know, it is both worthwhile and often extraordinary how much you can save if you tear apart your spending. I remember cutting our spending by a colossal one-third (I was stunned) back in an earlier recession. Especially if you have grown fast, the reins on spending can get more than a little loose. I was also lucky to have had at that point a very strong and very proactive team who completely bought into the reasons for doing it.

The danger comes with the mix of data and human beings; like oil and water, they fail to mix. On paper, it is easy to see that there is a lot of careless spending. Large companies and fast-growth startups alike can be pretty lax on controlling the odd extra perk, and generous to the point of crazy with expenses. But back in accounts, it is suddenly all too obvious that Simon in sales had no reason (other than to pick up his distant cousin) to go to Heathrow on Saturday, for which he claimed hefty travel expenses. 

In a theoretical discussion, a supermarket brand of free tea and coffee will be deemed perfectly adequate instead of laying on a choice of slightly exotic top brands in the office. The query arises why when parking expenses are paid, no one uses an open-air one down the block that the underground at five times the price? The data makes it so sensible -surely no one can object?

The problem is that they can – and do. Especially if handled wrongly. Take on of the most readily turned to control of costs, that of adding trackers to company vehicles. Hard not to go this route when moderately simple data establishes a geyser of wastage in this area. However, trackers are contentious and almost guaranteed to produce an absolute uproar. The people at fault will be stirred by both guilt and fury that they are being stopped. Those who are innocent will feel untrusted. 

When other perks that have always been there are announced as being removed, people feel deprived, controlled, and angry. The divide between management and the remainder of the workforce will split into a broad and bitter gap. That quick announcement mentioning some commonsense economic generalities by taking things away will not cut it.

The reason it won’t cut it is that this is micro-management at its worst, treating your team as an idiotic enemy who must be controlled and cannot be trusted. That team, meanwhile, sees a healthy company that, out of the blue, is trying to make more money by taking things away from them. Not surprisingly, they are savage.

A different approach would be to celebrate sustained sales when other companies have been less fortunate: To then share the headlines of the data on costs, which may well shock those unaware. And in the time-honoured way of the good news/bad news/ good news sandwich, follow this by telling them how valued they are and ask for their input in a project to slash the costs. Arrange some group brainstorming, and perhaps even offer rewards for the best and most effective cost-saving project. Ask them to list what goodies matter the most in their lives, so you budget to keep them. Make it clear you want to work together to make the company more resilient. 

Bin the micro-managing and dictation and instead treat your team as intelligent human beings who ultimately have many of the same goals you do. You will get a happy team, who take personal responsibility in working at your side to build a stronger company.

Jan Cavelle
Jan Cavelle

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