10 Steps to Implementing Best Practices Cost Cutting
By John Maver
Your company may have completed the first round of cost cutting. Now what??? Unfortunately, just cutting costs isn’t the key. It is cutting the right costs and having the company be able to continue to progress.
Very few companies actually took the time needed to update their strategic business plan before they cut. The pressures were on and action had to be taken - they thought. Many took a cursory glance at the plan, but most didn’t review it in depth. As a result, these companies have made cost cuts that in many instances will have the opposite effect of what was intended on revenues, operations, the employees and the projects underway. What seem to be small cuts in one department can totally undermine the effect of another department.
Other companies reviewed their plans and updated them to reflect the current economic situation prior to making the first round of cost cuts. However, many are finding themselves with the same list of projects and initiatives as before. But with fewer resources to support them. It is difficult to kill projects.
Yes, there are some companies that had prepared in advance for the downturn and had programs in place at reduced spending levels to address the needs. Congratulations to them. They will do well.
However, if your company is part of the great majority and is in the first two groups, here are some best practice steps to cost cutting and staying alive.
- Step 1
In all cases it is critical to start with your business plan. Review the complete business plan with the entire executive team. Make certain all understand the direction of the company and what are the high leverage items that are necessary to achieve the goals. These elements need to be correct before you should proceed.
Review all of your current operations and staffing. Determine what is critical versus what has always been or what is nice to have.
Prioritize all of your basic business operations that are essential to keep things running. Remember that this is cut back time and you want to ensure that you are cutting the right elements.
List all of the projects and initiatives currently underway and upcoming. Determine the resources required, the benefit expected and the timing of resource requirement and benefit delivery.
Prioritize all of the projects that were identified above. Realistically, there are only going to be three or four major projects that will make a significant difference to the results.
Determine what can be delayed or cancelled without dramatically hurting revenue or customer relations.
Allocate financial and human resources to the highest priority projects and to those the essential business operations.
“Collect and pool” all of the remaining resources. If the resource isn’t being required, determine if some training can make that resource substantially more effective to you! If so, invest in the training, and then reassign the resource to a high leverage project.
Review all of the operations and projects to determine ways that they can be accomplished with lower resource requirements. This is often a step where an outside resource can be extremely cost effective. Take the resources that are freed up and add them to the pool.
Take the cuts now. The review of the strategic business plan, the prioritization of operation requirements and projects and the assigning of required resources enable the company to identify further possible reductions in costs and expenses without undermining the business.
If you are about to undertake cost cutting measures for your company, we can help you. We have a strong track record of success with many companies.
“The best investment we made at our company was bringing in expert outside help. The speed at which everything was accomplished and the ROI on the investment was significant.” - Robert Mander - CEO
John Maver has been President or General Manager of Divisions with Procter & Gamble and the Clorox Company, CEO of a healthcare company and has broad based consulting experience with both domestic and international success. John has the business skills to quickly provide analysis of the issues and opportunities companies face and then to create plans and execution that deliver success. His breadth of experience brings fresh ideas and creative ways to accelerate the business of his clients. As a business advisor to CEOs, COOs and other senior executives, John has the knowledge to serve as their trusted guide. John is currently the president of the Maver Management Group.
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