As I read every day about layoffs and an economy headed close to if not back into recession, I can’t help but feel like we’re back in 2008.
Are there mistakes that companies made then that they can avoid making now? The answer is yes – and that’s why I feel it’s important to issue this special edition.
Cost cutting has begun in many companies – and probably rightfully so. But there are right ways to cut costs and wrong ways. My intent here is to provide some perspective on this topic, with the hope that rational cost cutting takes place – reductions that will truly position companies for future success.
Global stock markets are in turmoil, confidence is eroding and layoffs are accelerating. That described the situation three years ago in the midst of the financial crisis. Add European debt problems, an increasingly dysfunctional government and continued high unemployment, and you have today’s reality.
Large financial services companies – such as UBS and AllianceBernstein – have already joined the layoff parade and I’m sure that there will be many more to follow. A recently released poll by FundFire indicates that a majority of asset and wealth management firms are in cost-cutting mode (both layoffs and otherwise).
It may become inevitable for you and your company to cut costs in this environment. Regardless of how well you have managed your business, times like these force everyone to tighten their belts.
There are right ways to cut costs and wrong ways. Panic cost cutting – characterized by “across-the-board” cuts – often reflect knee-jerk reactions rather than well thought-out plans. Should every area of your firm really be cut, and by the same amount? I find it hard to believe that this would position any company for long-term success.
Consider leveraging your strengths and investing in certain areas of your business and perhaps taking the opportunity to reduce your exposure to other areas that have been under-performing and have a less optimistic outlook.
We recommend that you begin by analyzing the foundation of your business – your three Ps – People, Planning and Process:
- People – Do you have the right people in the right places and are they properly trained?
- Planning – Are your strategic goals in sync with your resources?
- Process – Do you have the right processes and tools in place?
Taking a comprehensive look at your business prior to making cuts will more than likely put your firm in a better position to meet your goals. The assessments that we conduct help companies align their people, processes and planning with their corporate goals, helping them turn potential into profits.
Whether you conduct your own assessment or hire someone to help you, we urge you to spend the time upfront – before you slash costs and jobs. It doesn’t have to take a long time and you will still end-up having to make difficult decisions; but at least the odds are greater that you will make the correct ones.
Founder & Principal, AK Advisory Partners, LLC and Co-Founder of Consult P3.