December 20, 2014
In times of financial crisis, what is the best way for a company to cut costs? In most cases organizations think of laying off staff as an easy way to cut down on expenses. I am not the expert but I think there are a few points in this post which may give the experts a few ideas:
The story is told of a Hebrew living in Egypt in the second millennium B.C, Joseph by name. The Pharaoh had seen into the future and Joseph’s interpretation of the dream was seven years of plenty followed by seven years of poverty. During Egypt’s boom, Joseph advised that 20 percent of each citizen’s income be taxed and kept in reserves in preparation for the seven years of poverty.
I believe it is not necessary to see into the future prophetically to also do this kind of preparation. Organizations should learn to save and reinvest profits, as well as diversify investments when the going is good. Never spend more than is necessary on non-core, non-profitable expenses like end-of-year parties and bills in expensive hotels just because there seems to be a lot of money to spend.
Never overspend on recruitment. Think thoroughly about how new staffs are being hired. It is better not to hire someone than to hire them and fire them after only six months in the name of downsizing. Develop creative ways of making your current staff strength achieve more with less stress. Typical approaches are standardization, process automation, new skills acquisition and team work.
Never pay staff more than is necessary even if there are excess funds. It is better for a staff to earn $4000 guaranteed monthly for 20 years than to earn a lavish $20000 monthly for one year. Having too much money all at once will typically result in overspending. Natural human behavior is such that before a person realizes he is not really investing, the boom period is almost over.
A staff will be more committed to the organization if he believes the organization is thinking about his future and if he feels he has a future with the organization. One standard way to make staff feel this way is real estate. Develop a Mortgage System for staff and let them pay for their own homes over the long term. Partnering with Real Estate firms is a quick way to achieve this.
Develop a system to sell company shares to staff. Where the capital required for investment is a concern, staff can form small to medium groups and pool resources to buy shares from their own company. Reward staff with company shares after specified years of service or even as end of year rewards. Rather than liquid cash or expensive gifts, owning company shares make the staff believe that their future is tied to the organization. This will create a more committed workforce and more passion to deliver results. The company becomes ‘ours’ not just ‘theirs’.
Review technology constantly to verify that the ROI for license cost on applications for example is worth it. There is no need to by new versions if the old version is still meeting needs and still under support. There is no need to buy fancy new software to achieve results that existing applications can produce.
For example, there is no need for an elaborate database backup solution if there is only one database platform which provides its own backup functionality without any extra cost. Explore all possible ways of making the existing technology do more before even considering buying new ones.
Develop a philosophy within the organization that avoids any kind of waste. Place limits on bandwidth usage for personal purposes. Track usage of disposables like office stationary. Use modest hotels and reduce spending on travel. Where feasible, adopt online training approaches. Be careful with the number of vendors engaged (standardizing software contributes in achieving this).
I do hope I have made some sense. Your thoughts on these points are very much welcome.