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Help for managers asked to cut costs, now

Avoid layoffs and keep your company running

April 07, 2020

Home Blog Help for managers asked to cut costs, now
cut costs

The 2020 economic landscape started with a coronavirus earthquake and has since been (and will be) experiencing constant aftershocks and tremors.

The result has been swift, direct mandates in most commercial enterprises to limit non-essential spending and in some cases, to start cutting costs. If those mandates haven’t come down yet in your organization, you may as well begin thinking about it and preparing anyway.

This article is some basic advice to help managers and department heads do that preparation. It’s added pressure on top of managing newly remote work teams and dealing with personal coronavirus circumstances. These ideas can help alleviate some of that pressure.

Think big, but act small

Unless you’re a CIO or other position of high responsibility and authority, you have limited to no control over ultimate expense cuts. Yet it’s important to think big: consider your efforts as part of the whole. Protect turf, but also to be willing to let go of low-value, low-priority areas.

Then, especially if you’ve been handed a big number to cut, the best way to approach it is to break it down. Come up with ideas for lots of small cuts and sacrifices. Look first for incremental savings opportunities that are as actionable and painless as possible.

According to an article in Harvard Business Review published nearly a decade ago but full of timeless advice, “Most departments can cut up to 10% of costs without changing their interactions with the rest of the organization.”

We also found a no-nonsense, no-fluff, no-holds-barred article on 17 ways to reduce overhead, which is geared toward entrepreneurs and small businesses, and big on taking a critical, cold look at staff overhead. Yet we think the following are highly applicable on a departmental / functional level and relevant to current circumstances:

reduce overhead
  • Stop the “make it work” culture and force people to prioritize.
  • Scrutinize ROI and if it’s high, keep it or do it.
  • Consider leasing vs. owning (to which we would add contracting vs. hiring).
  • Don’t waste time or resources reinventing the wheel.

Think small, but act big

The Harvard Review article includes ideas and advice for making incremental cuts. They are similar to many articles you can find on the internet on how to cut costs quickly—we’ll include resource links at the end of this post.

What they all have in common is turning the lens around, from a macro view to a micro view. After looking at the whole picture, start zooming in one small expense category at a time, for example:

  • Office products and supplies: Look to eliminate waste and what LAC and other spend management experts call maverick spend. Turn to your procurement / purchasing function and use the contracts they’ve put in place, rather than making small purchases directly and expensing them.
  • Subscription costs: Identify nice-to-have but non-essential software-as-a-service (SaaS) apps or information services that aren’t widely used and eliminate.
  • Paper: Examine processes that have remained paper-heavy or otherwise inefficient and more costly.

The point is to scrutinize every bill or statement or purchasing request that comes your way.

Put people first

Companies are being asked by government and economic leaders to find alternatives to layoffs if at all possible. Job sharing and individual reductions in hours are one way, as are pay reductions and bonus cuts for high earners.

Now more than ever, when we all play a part, it’s only fair that we all share the pain and the burdens. Not only that, but concerns are already being expressed by business owners and economic experts about the time and effort it will take to ramp-up again after the pandemic threat passes.

Just as you can turn to procurement / purchasing for their expertise and guidance, you can also turn to HR for their guidance on staffing decisions. HR is closer to new and revised legislation that can provide resources and support. According to LAC Group HR Manager Greg Galaida,

“Beyond guidance on furlough rules and state and federal legislation like the Worker Adjustment and Retraining Notification Act of 1988 (WARN) Act, now is a particularly important time to lean on your Human Resources department for guidance on rapidly changing legislation due specifically to the pandemic.

The Families First Coronavirus Response Act (FFCRA) makes significant short-term changes to Paid Sick Leave requirements and the federal Family and Medical Leave Act of 1993 (FMLA) for companies with less than 500 employees, while the even more recent Coronavirus Aid, Relief, and Economic Security Act (CARES) Act includes a number of measures to provide immediate economic relief to both individuals and businesses, especially small companies.”

Yet that said and even seeking internal guidance and advice, now is a good time to assess the roles and responsibilities currently assigned and established in your department.

  • What areas are ripe for change, streamlining, improving?
  • What is the best use of everyone’s capacity and skills in relation to the current (and likely changing) needs of the organization?

Finally, even with all the new circumstances we’re dealing with, the need to get work done continues with even more urgency, so now is a good time to assess options like managed services or an agency approach, like LAC Group’s capabilities on a spectrum of information services. We can step in to bridge gaps, work on special projects, and add much-needed skills and expertise in firms and companies that are hesitant to hire.

None of these suggestions are easy or popular. Yet a time of crisis and lack can be the best time for innovation (necessity being the mother of invention) as well as positive change and renewed purpose and focus.

Resource links

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