In the turbulent times like these all the corporations are running haywire to cut costs, increasing efficiency and productivity. A lot of tough measures are being taken across corporations. The reality behind a lot of these cost cutting frenzies is a bit dark. Here is what I see around when I see corporations rolling out cost cutting drives. For most of the organizations (I am not talking about Plants and manufacturing units, where cost cutting is a different game all together) the first and foremost things are to monitor their spending heads and change the approval process for greater visibility. Then we go about removing the non necessary expenditure and host of other activities. But what most people forget or ignore is what I would like to call as the cultural costing balance of the company. I would like to make an assumption based on my experience that over a period of time an average human mind tends to be active and concentrating for fixed number of hours. When you change your approval hierarchy for a process, then one should always remember that what exactly being done is that a senior person has been assigned an additional responsibility to monitor the spending heads. For the sake of clarity let’s assume that the person spends an hour a day in validating and approving the spending to cut the costs. Now if we assume a 24-day working month, the person would have utilized 3 working (8 hrs) days a month for the added activity. Now even if he stretches initially the equilibrium would come somewhere when he would have re-organized his time to save 1 day of time. Now the most important question what does this means for the company? To be specific it simply means that a senior resource whose job description entails prime focus on the core business of the company is working less for 2-3 days. The results achieved are the reduction in spending, but that’s not all the core business results show growth sometimes more than the linear; however the returns from cost would generally be stable on a straight line. This is a place where the organizations have to behave differently instead of driving the cost cutting through monitoring and policing, the cost cutting initiative needs to be driven down through the method of engagement and subordination. The fact of the matter is that the lower in the hierarchy the people not only have smaller impact on the core business but also their time is also abundantly available that too at a lower real as well as opportunity cost. It would make economically more sense and enhanced engagement for the employee with the organizations in the tough conditions. So next time you decide to cut cost re-think the implementation process.
by Prats | on Thursday, April 9th, 2009 at 2:59 pm | 
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