Cutting costs – at what cost?

There’s a cost to cutting costs; one that your business could be better off without. NAOMI SIMSON

By Naomi Simson

Efficient businesses continually look at ways of reducing overheads and increasing productivity. However there are many unseen costs in cutting costs. “Don’t cut off your nose to spite your face”?

I was at a speaking engagement – on employee engagement – talking about what we do at RedBalloon and for our clients. As per my previous blogs on Employees are the new customers, I talk all about the power of what employees say about their employers with some vivid examples and powerful statistics.

After the session, one of the guests came up and said: “I know exactly what you are talking about. I have worked for my company for nine years – and for our 10th year of service we are flown to Tokyo for a trip to head office and to be honoured for our service.

“In the past we have had about 3% staff turnover a year. We got a new boss last year and one of the first things he did to cut costs was to take away this perk. I was so close to getting my trip you cannot believe how mad I am. Not only that since he changed the rule our staff turn over has escalated to 18%…and the boss wonders why.”

He continued: “You are quite right Naomi – I tell anyone and everyone who will listen about how stingy my employer has got and that I missed out, just one year before I was due.”

Another person joined the conversation, sharing that “at our office we still have a ‘them and us’ attitude – the executives get chocolate biscuits; we get family assorted, they get a tea lady; we get make your own tea.”

I didn’t think this sort of thing still went on in Australian businesses – effectively the old executive wash room mentality.

What you think you are saving in non-chocolate biscuits costs you a fortune in disengaged employees who love telling anyone who will listen how archaic the company they work for is.

At RedBalloon no one is ever “too important” to do the basics – our CFO the wonderful Pete is the one heading up the road to buy the loo paper. He always is the number one dishwasher after a company barbeque or lunch.

You might think but should such an “expensive” resource be doing such things. (We are only 43 people) but as I’ve said before: “As the leadership team goes – so goes the rest of the organisation”.

There is cutting costs – but at what cost. Get your people involved with a program that gets them to think of the best place to find efficiencies and cost savings are. They know, and if they’re part of the process then they will be very happy to support the initiative.

If you are cost cutting, watch out for the hidden costs.

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