Understanding & Assessing:
The first step requires an understanding of the long term goals of your enterprise business and which value is more important, short or long term. Do you need immediate returns?
When does cost cutting cost you more than revenue generation? What does cost cutting do to the morale of the people - how do you retain the good people? What are the benefits of cutting different business functions? How do you determine which processes can and should be outsourced?
A holistic assessment of where the enterprise stands within its industry needs to occur and why your business' products and services are costing you more than the competition.
- First priority is planning ahead; do not to wait until you have to do something. Be a forward thinker, know where your business is going and the ROI of getting to your destination. Align your destination with corporate direction and vision.
- Second priority is maintaining shareholder value. Remember who actually has invested resources and the ultimate interest in the success of your company. In the case of a public company you ultimately answer to the stock holders.
- Third priority is to stay informed of economic trends, competition and financial indicators. Everything comes down to the exchanges, indexes, sectors and your company's stock performance. If you don't make cuts, revenue will drop, but cutting back in the wrong places could be worse. You're not an island, if you are part of a sector and that sector's value drops it should sound an alert, chances are it will affect you.
Stop the Bleeding:
Decide what costs cuts must be made, determine what innovations are going to be needed to create those cuts and align them with short and long term goals. If you cut too much at once you may be okay for a quarter but may not be able to compete for new market share or retain your current share of the market next quarter.
Your enterprise should be already running lean and green. This is not a political partisan but a real business position. If your business is green, you are running effectively and efficiently, not wasting resources or taking up too much space, you are delivering the best product or service with the least amount of cost. Start by reducing expenditures for power, printing, consumables and parties, all of which are easier to cut than employees. Put off client architecture pilot programs, use thin provisioning, implement data de-duplication to cut storage costs, consolidate and virtualize servers and introduce vendor competition for existing products.
Determine what projects need to be completed or actually started. Thoroughly assess business operations utilizing several themes including, what projects affect your revenue stream, what projects could raise you revenue, how manual is the operation and what can be sold. Prioritize these themes by valuing the ratio of price to revenue to determine what things can be shut down. Apply more sophisticated negotiations processes to eliminate waste and redundancy. Verify invoices, make that you are not being charged incorrectly for costly operation support contracts. Most importantly, defer any projects that don't impact sales.
Employee Reduction:
If you are already suffering loss in revenue, the fastest way to reduce costs is to decrease head count. Rank employees by value and eliminate those yielding minimal returns to the business. The danger is determining who stays and who goes. How do you place a real value on people and retain them? If your company is having difficulty, your good people have already figured it out and are acting on that perception. How do you retain those good people? Most employees today have fiduciary responsibilities and a loss of income would certainly not be acceptable. They will jump ship before their job is on the line.
The solution to this problem starts long before the trigger event, at hiring or at a change in assignment. When moving people to a new position, your business needs to make sure a culture of collaboration exists, and a sense of relevance can be fostered. Below are some best practices to take into account when employee cuts loom:
Transparency - be truthful and straight forward toward your employees. Make sure your reports are aware of the company's financial situation. Rumors and dooming discussions will only make things worse. You want employees to come to you and discuss concerns. Be sure to provide definitive and consistent answers to their questions and expand discussions to personal direction, vision and goals. Stay away from communicating to a large group until you have spoken to all your direct reports.
Work Relevance - have a discussion focused on the relevance of the work that the employee is delivering. Discuss why their role is important, the impact of execution, where they fit in the current environment and why their deliverables are crucial to the company's bottom line.
Defuse Problems - keep your eyes open for employees that are undermining your good will. During cut backs emotions run high and employees might find the need to challenge or undermine your decisions. Remedy the problem by making your employees your allies. Get them involved in the process when possible and address their concerns quickly. Confront difficult employees, ask for their help and emphasize the fact that undermining won't be accepted. This type of behavior is usually the result of fear from change, and removing that person from your department or company may not always be the best solution.
Senior Leadership Meeting - if you feel that you are still not connecting with an employee, ask that employee if they would like to have a meeting with your superior or human resources. Some employees may need affirmation of the company's position from multiple sources or from someone they don't report to.
It is also important to remember when making large cuts to your enterprise to stop all new hires, no exceptions. New employees should not be brought in during cuts. They should be recruited, oriented, trained after cuts have been finalized. Most new employees have no institutional knowledge of the company and those on the way out will not harbor much support for the new hire, all equaling additional cost and ramp-up time. Cut unnecessary support staff in all business units and provide RSU (Restricted Stock Units) in lieu of bonuses. Disburse payouts with multi-year milestones in a ranking fashion, revenue generating first, revenue supporting second.
Rebuild and Outsource:
Rent a cost cutting crew. Bring in specialized consultants and an advisory board to help you with some decisions. Assess your software, hardware, financial systems and other non sales units. Is it time upgrade, invigorate, consolidate systems? Outsourcing companies provide cutting edge automated solutions and innovative services at a fraction of the cost it takes to develop and manage in house. Many outsourcing companies bring their consultants and tech experts' onsite to continuously manage and monitor projects.
Determine what you are paying for and where is there is opportunity for savings. Ask your vendors to help you identify unneeded cost, useless projects or new projects or proposals that will cut cost, not in the long term but tomorrow. By holistically planning long term to determine actual cost to the business and addressing, assessing and monitoring the needs of your enterprise business, you can achieve cost cutting targets before they become an issue.
Marco Giunta's new book "Rethinking Sales - Succeeding in the New Age of Selling" is now available. Buy now and receive 20% off! Go to http://www.rethinkingsales.com/discount.
"Rethinking Sales" embraces modern technologies available to grow our businesses quickly, yet gets back to the basics of true relationship building as the core of the sales process. You can read more about Marco and his book at http://www.rethinkingsales.com
Marco is currently divisional CIO at CompuCom Systems, concentrating on engaging with companies to reduce the cost of IT management,while aligning the business needs and enhancing the end user experience.
Before joining CompuCom, Marco Giunta was the founder of the Managed Infrastructure Services at Collective Technologies. In this position he pioneered managed infrastructure outsourcing to financial firms and traveled the world helping Companies develop this strategy. This division was later acquired by Accenture.
As a 30-year industry veteran, Marco Giunta has always had a futurist look at IT, and worked with many of the leading companies in the Outsourcing industry, in the likes of Tata, Accenture, Collective Technologies, Storage Networks, Cordiant Communications, Decision One and IBM.
Marco has held various positions of increasing responsibility in management, sales, technology, and business development covering Information Technology, E-commerce, Data Center infrastructure, Startup Companies and enterprise software and communications. As an entrepreneur he led two of his own endeavors with DDLINK, a Web 2.0 strategy company and MicroPower, an IT service solution provider.
Knowledge is power! The "Rethinking Sales" information will show you that you that if you have the drive and determination to succeed, bad economy or not, you can succeed and make the money you deserve!
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