How many times have you been asked to cut cost? How many times have you been asked to cut costs so deeply that it is beyond your comprehension?
In those situations you can always use the Brute Force method. Hacking and slashing resources and expenses in this way often compromises the very capabilities, skills, morale and services that are keeping your company afloat in the first place. But it can be quick.
But if you have the chance to deploy a proper Change Management program to drive the cost reductions or other improvements that you are looking for then you may have many more constructive opportunities in front of you.
There are many different drivers of the need to change and cut costs!
The Brute Force Approach!
In some cases emergencies or extenuating circumstances force the need for immediate change in your business, your processes, your metrics and your organization. Your company may have lost a lot of money or your company may not have enough cash to keep the company running. Or there may have been a management change and new management wants to make its mark quickly.
Those situations are often met with imposed and abrupt cost reductions. Senior management has made high level decisions on where to cut cost. There is often not a lot of discussion. The decisions can be viewed as uninformed. And in fact there is more often than not a lot of dissension.
Most employees are told, not asked, what the cuts will be. And often there is a lack of appropriate communication. While many will understand the need for cost cutting the way in which the cuts are managed and deployed often results in severe degradation in morale.
The Brute Force Approach certainly has an ability to make a rapid cut in costs. And there are certainly situations where it is necessary in order to ensure the company survives.
But if you had the chance to make cost cutting in a more intelligent, deliberate and strategic way wouldn’t you prefer that approach?
An Engaging, Strategic Approach!
Aside from emergency situations a company should be able to foresee the need for making improvements and cutting costs. Financial forecasts, competitive pressures, market dynamics, employee feedback and Board demands and insights will all inform the need for the company to take action to improve metrics, improve processes and cut costs.
In those situations there is a great opportunity to engage all employees in the process. By communicating these pressures up front to employees so that there is a transparent understanding of what needs to be done the company can largely preserve a level of trust, alignment, and engagement in the ensuing cost management process.
Even if there are significant cost reductions or improvements required there are a series of steps which can help create an informed, motivated workforce that will make your task easier and achieve great results.
Define and Communicate the Cost Problem/Challenge
Open communication about the problem, the scope, the objective and the desired outcome of the project will frame the situation for everyone. People may have questions or suggestions but with upfront definition of the problem and desired outcome they are more likely to be aligned and bought in to help the cause.
Including a Change Management Work Stream in your project will provide a forum to address employee concerns along the way, positively shape the direction of your project, and dramatically increase the success of the project.
Employees are almost exclusively best informed as to how day-to-day processes work, where they can be improved, where costs can be cut, and how the organization can move forward.
By soliciting ideas from Employees there are likely to be many new ideas to be considered that will facilitate achieving the desired result. Even if there a lot of smaller impact ideas that come from Employees they all add up.
Assess Your Current State
It is important to ensure that there is a common grounding in what your current metrics are and what your current state process are. This should include an open and honest understanding of the process gaps and the metric shortfalls to your targets.
I have also always found that having a strong partnership with your Finance team is indescribably important. Finance can provide phenomenal value in terms of assessing your current state and defining target areas. Further it is most important that Finance be there to audit and confirm any future improvements that are made to ensure their validity and legitimacy.
With your objective and current situation understood and with ideas from throughout your organization you should now be ready to map out your future state processes and define the improvements you need to make.
There will be a variety of solutions and actions plans that need to be undertaken. Some may be quickly implemented at low-cost. Others may require extensive capital investment and take a longer period of time to implement. In any case you should have a wide range of solutions to implement.
As you implement your changes you must always track the results against your original targets. If your results are falling short then you should go back to look for further improvements or ways to get your project back on track. Until you meet or exceed your original target your work is not done.
The other issue that always comes up is sustainability. Your project may have results in great improvements and savings but once the project is completed will those improvements be sustained? It is a great question. And in a culture of continuous improvement you should always be prepared to look for ways to extend or ensure the future viability of your improvements.
Whether you deploy a Brute Force approach or your are able to implement a more thoughtful and deliberate Improvement program is often a function of circumstances. There are advantages and disadvantages to each approach.
The Brute Force approach can yield quick results but you can also lose a lot of your employee morale and commitment very quickly.
It is possible to implement an intelligent Change Management program that incorporates a need for rapid, tactical and strategic improvements while at the same time engaging and aligning your employees. Breakthrough transformational improvements will most often come with this approach.