Better Business Coaching

After years of profligacy fueled by cheap and easily accessible debt, the pendulum has swung to the other extreme, and the new mantra is “cost-cutting”. In the current climate, it is true that cost-cutting is extremely important, but it cannot be an end by itself. Moreover, without a clearly defined objective, you could easily end up cutting muscle instead of fat.

Instead let us examine what you are trying to achieve by cost-cutting. What you should be trying to achieve are higher productivity and new and better ways to deliver value to your customers. Across the board cost-cutting may, in fact, impair your ability to deliver both. In fact, you may be required to, actually, raise your expenditure in areas such as information technology to take advantage of the new advances and reduce your own operating costs. Doing more with less sometimes involve a long-term trade-off between selective investments now and long-term cost reductions.

What you should be concentrating on is getting the maximum value for your money by improving asset productivity, getting more value for your dollar and maximizing the quality of service or product delivery. A tempting way to start cost-cutting is to try and save money on the employees at the bottom of the ladder. Instead, start cost-cutting at the top and demonstrate to your employees that you are acting out of principle and not convenience. Make sure you understand what the results of the cost-cutting are going to be. For instance, stop traveling first class and look for cheap flights for senior management wherever possible.

And make sure that your employees understand that you are all in the same boat that you sink or swim together. Once they see that you are committed running the business efficiently, and that it is for their own good, you may be pleasantly surprised by the constructive suggestions that they can come up with.