Reducing the pains of cost cutting
Four strategies to tackle the people challenges of cost reduction
With the recent economic downturn, many companies are increasing their focus on cost improvement. While reducing costs is important to business survival, the expected benefits from cost reduction may not be fully achieved if the people-related issues are not well-managed. Since the resulting changes from cost reduction strategies often have a significant impact on employees, it is important that companies dedicate significant time and effort to planning for and addressing these challenges.
In a Deloitte cost improvement survey, "In Fighting Shape: A Survey of Cost Improvement Trends from Fortune 500 Companies," results revealed a surprising fact - though many companies acknowledged the importance of corporate culture and employee behavior in driving successful cost reduction, many underestimated the effort required to make these changes happen.
Cost cutting can be a painful process for all parties involved, but we believe there are strategies that companies can consider to mitigate such pains. How do you tackle these people challenges?
- Reinforce a cost conscious culture
Address your cultural battles. Work with influential leaders to reinforce desired behaviors that will help sustain the changes now and in the long-term
- Communicate with transparency and sensitivity
Communicate as early as possible to stay ahead of rumors / uncertainty and help employees stay focused at excelling at work
- Ensure your leadership team is fully aligned with the cost reduction goals
Address sticky points preventing full leadership alignment and actively engage them in executing the changes
- Retain your critical talent and treat people with respect
Know your keepers and let them know they will be taken care of. Minimize disruption by respecting retained and displaced employees
Companies that are prepared to address these challenges are likely to realize significant cost savings and sustainable improvements to their cost structures.