“Stopping the fruit bowl or the morning papers is minimal to their budget, but cutting the training budget and downsizing the Christmas party reinforces management’s message of the need to focus on profitability.”
Ways to cut costs
- A cost-conscious culture: Cost-cutting is often a strategy for tough times, but a sudden focus on cost can panic investors, customers and suppliers. Leading companies maintain a constant focus on keeping costs down – with those at the top reviewing and keeping costs down themselves – and on remaining vigilant about restating the importance of the measures to staff and checking the reasons behind price increases from suppliers.
- Review staff costs. FMG reportedly sacked close to 1000 staff in recent weeks, which means the chronic skills shortages that have sent salaries skyrocketing are coming to an end. Revisit contracts for existing staff as soon as possible and consider using labour hire to increase flexibility.
- Deploy low-cost measures to boost morale. Link rewards to the budget bottom line or other KPIs; build a culture of appreciation of employee effort with actions such as regular positive feedback; put the passionate, engaged people in strategic positions to inspire those around them; recognise special events in the lives of staff with simple gestures; keeping the door open to discuss problems, issues and ideas.
- Only buy premium services when they are directly related to business objectives. For example, replace travel with video conferencing whenever possible and move essential travel costs to economy class.
- Talk to suppliers about ways to reduce costs. They may have ideas that are a win for both sides. Check through bills for mistakes – or engage experts to do so – especially for complex bills such as phone and data charges. Centralise purchasing to ensure the best economies of scale. This also allows purchasing officers to build personal relationships with suppliers that leads to savings, such as hearing about discounts or special offers early.
- Take a detailed look at the company’s information technology expense. Changing to virtual servers can slash storage costs. So can having a policy for document storage that helps employees to know what emails and files they can delete and when. Revisit the need for new PCs – can they be upgraded?
- Make sure customers are paying on time.
- Reduce printing costs by offering customers online bills and shareholders soft-copy annual reports, insisting on electronic transactions for suppliers, setting internal printers to black and white, double-sided defaults.
- Talk to the bank, which FMG has already done, securing a new debt facility despite its downgraded credit rating and the scepticism of many commentators.
This article first appeared on LeadingCompany.
