Sit back and reflect on every day stories from organizations on cost-based downsizing. All have reasons; reducing bench strength or poor performers, rationalizing businesses, managing costs through supply chain, expense management or sheer alteration to the Target Operating Model to focus on a strategy led structure. Each of them has a valid story. To me this act of cost optimization, including people downsizing, is not a sin, it is a process that corporate sector can and should learn to do. Not at periodic intervals or when pushed to a corner but as a way of life. Just as how hiring & asset acquisition is a vital element of growth, so is optimization, to stay healthy at all times. Business cycles and its impact on shareholder value are not new to the world of economics. But the science & art of doing so gracefully is a much-needed area of learning. “Culturally, Cost Optimization cannot feel too much like just cutting costs”.
Being profitable is not a bad thing!
In a variety of organizations that embarks on cost optimization, I often seek to probe if the culture is treating it as a one-time action or a way of life activity and whether the process that they wish to follow is transparent, honest and upright. Experience tells you that few organizations seek to conduct these processes with a degree of uprightness it deserves. And the answers, to why so, are complex and ingrained in the socio – cultural aspects of our feudalistic society. Paternalism, Reservations, Minority Claims all with the purported desire to do no harm, play to public & appear to look good, And these hypocritical values, reflect squarely in the way stereotypes work in companies; those who ask for data based decision making as lacking trust, the manager who questions growth projections as a cynic, the one who budgets optimum growth as lacking in vision, HR a villain for asking why we should hire/fire, a CFO is made the target of ridicule for pushing cost initiatives, a CEO who demands, as autocratic, or a sales manager who insists on equivalent travel from women, as being not sensitized to diversity, has lead to this set of superficial cost structures incurred to look good. The degree of cynicism, to cost initiatives, is notorious in the back-room gossip. The problem lies in the word “initiative” as against the need for cost optimization as a “cultural journey”.
In some cultures, leaders wake up to ask for profitable cost optimization solutions when it is very late: where they should have controlled hiring head on, they seek to correct the tail. Where a decision to sell stakes should happen now, it is stretched to a never-ending set of debates on why, what, when, how stakeholder management type of delays forcing an inevitable urgency to the final action thus compromising cultural processes such as prior preparation, communication, focused target numbers, environment management, that could have happened quite effectively and on time.
An investigation of companies at another cultural level throws up shocking practices; conspicuous expenditures continue at the leadership level or rampant delays in deciding on curtailing wastages in operations, sourcing, procurement, supply chain, real estate, technology, product promotion or curbing poor work practices that deal with vacation, leave, working hours, holidays, multi-tasking, flexible working, job sizing, home offices, low cost locations etc. Even a simple diagnostic can reveal the hidden potential in savings that can be extracted from revitalized procurement or rationalized logistics chain or curtailed IT expenditure proving that it is lot more long term and simpler to rationalize the cost chain than to embark on optimizing the human chain which tends to reinvent itself when times get batter in any case. Identifying and eliminating wastages that are intrinsic to the operational chain is more cultural in cost management than the time, effort and agony experienced by organizational members to downsize manpower. But this utopian possibility of not to downsize people exists only in organizations where the leaders have culturally controlled hiring in the first place! All at the cost of profitable balance sheets.
A company’s culture can have a significant impact on a profitable financial performance. Companies with adaptive cultures emphasized by key managerial constituencies—customers, stockholders, and employees—realized, revenue, stock price & net income increases. Such cultural experiences are best applied when organizations seek to push employee contribution ahead of other factors that influences business performance. Maintain a transparent, strategic focus and alignment so that employees know how they are contributing to the results, & where employees come on par with customers when fulfillment of need is concerned. This is best achieved when a CEO demands that, “We want to change the culture, not just reduce costs but become profitable (although we do want to find significant cost savings)”.Posted by ZuzukiSX4 Posted on 31 Dec
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