How to Cut Costs Without Layoffs and Loss of Productivity

Posted by in Management | Comments Off on How to Cut Costs Without Layoffs and Loss of Productivity

Too many business owners are ready to cut their workforce first to save money, instead of developing a strategy to save as many jobs as possible because that has a direct effect on productivity.

Some of the most important business leaders, such as Jack Welch, former CEO of GE, think that the best strategy is to cut the bottom 10% of the workforce every year. Of course, that may work at a giant global corporation, but it may not be practical for many small businesses. Ten-percent of five total employees is one-half of an employee, which means, in reality, you lose an entire worker or 20 percent of your workforce!

To develop a business-smart approach to cost cutting, first start with the help of a forensics accountant. He or she will be able to find the unnecessary expenditures and waste that you couldnít.

That accountant will look for such expenditures as:

  • Office supplies that employees take home.
  • Entertainment, such as seats or boxes to professional sporting events.
  • Paid food and beverages.
  • Overtime and on-call pay.
  • Cost of hardware and software: Wait another year before replacing hardware and upgrading software. Drop maintenance contracts that cost more than buying parts.
  • Review your telecom costs, such as long distance, carrier providers and fees.

You can use this process for some positive, internal PR. Tell your employees that you are searching for ways to cut costs and save jobs; they may have suggestions that neither you nor the accountant discovered. Explain that cutting these costs could save their jobs, and that everyone wonít be receiving as many perks as in the past, such as free coffee or tickets to the local game.

Another part of this cost-cutting strategy is to look carefully at your customer relationships from a purely economic point of view. When times are tough, you may find it necessary to meet with a customer and explain that itís costing you more to maintain their account than the revenue it generates.

You can propose to the customer that he or she consider ordering more products and services from your company or reduce the amount of service you are providing. Even if you must dismiss the customer, try to do it on the most amiable terms, so there is still an opportunity to do business together in the future.

If there is no other choice than to terminate some employees, then try to avoid dismissing those that are directly involved in revenue generation and customer service. If your company has division managers, then ask for their input as to who should be laid off.

Although layoffs may seem to be the easiest way to cut costs, they may not be the smartest when you take a moment to look elsewhere to save money first.

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