 |
 |
 |
 |
 |
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Leadership in Tough Times - 5 Cost Reduction Mistakes
If you are in a senior role right now, you are probably having to make some tough decisions For many businesses the biggest challenge right now is having sufficient cash to meet obligations as they fall due. In these situations some form of cost reduction or cost containment is almost inevitable. Yet there are some common mistakes that leaders should seek to avoid. Mistake 1: Going for the long list When I worked in finance departments as soon as cost savings or cost reductions were mentioned, the immediate response was to create a long list of options. While this might seem obvious, what happened in my experience was that the long list (or the results of the brainstorm) never translated into an effective short list. Additionally, there was no systematic or structured evaluation of the options. Solution: Start with your long list but make a commitment to going through in a systematic and structured way in order to create a meaningful and useful short list that you will act on. Mistake 2: Relying too much on accountants Given that I am a professionally qualified accountant this might seem like an odd statement to make. Without doubt accountants can play a vital role in contributing ideas and pulling together the options. On the other hand, no matter how good the accountant is they can never have the same level of knowledge and insight as those who run or work in a specific area of the business. Solution: Make cost reduction programmes an operationally led rather than financially led process. Mistake 3: Ignoring waste and inefficiency No matter what type of organisation you work in, there is likely to be some element of waste or inefficiency. Yet they are often completely overlooked or ignored when it comes to cost reduction and cost containment. These areas of waste and inefficiency can often generate cost reduction opportunities with minimal pain or impact. Solution: Identify big areas of waste and inefficiency in the organisation and do something about them. Mistake 4: Focusing on the short term only Sometimes decisions have to be taken that make sense in the short term but are counter productive in the longer term. Drastically reducing training is often seen as a must do thing (and yes I have added to lists in the past). Yet if training is tied to delivering some specific long term growth objectives, it might be counter productive in the long term. Solution: Properly assess the impact on long term objectives when taking decisions about cost reduction opportunities. Mistake 5: Losing the best people Decisions about reducing headcount are often based around length of service. While it might be tempting to get rid of people who have been with the organisation the shortest period of time, make sure your reasons for doing so are sound and meet employment law requirements. There is a risk that the decisions you take short term actually result in you losing people who could make a real impact long term. Solution: Don't just take decisions based around the cost of severance payments. Look at the contribution individuals are currently making and could make in the future to the success of the organisation. Bottom Line - Key decisions around financial performance cannot be avoided but make sure you don't make some of the common mistakes that many make when it comes to cost reduction.
|
||||
|
||||
|
|
||||
|
|
|
|
 |