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The Nolan Company is pleased
to bring our readers a special series of new articles covering the
surprising opportunities and the risks of these turbulent times.
In each of the coming weeks, we will share our insights and
experiences in managing toward the upside during a time of unique
market dynamics.
Cutting Costs Across the Board:
A
Necessary Crisis Strategy?
Bob Grasing
President
In times of financial crisis many companies are forced to
initiate cost-cutting measures. For most banks and financial
institutions this means headcount reductions. If you Google
"cost-cutting strategies" you will find approximately 1.8 million
hits. Yet, many executives will take the "easy" way out and demand
10, 15, or 20 percent cuts across the board. This is not a strategy.
The expectation is that the "fat" will be trimmed while the result
may be just the opposite.
Consider this: An across the board headcount reduction will
impact the cost-conscious manager the most and impact the high-cost
manager the least—just the opposite desired outcome. Cutting costs
in an area where the manager has always been conscious of the number
of employees required to do the assigned work will, in effect, be
cutting into the muscle, not the fat. Conversely, a manager who has
operated with excess staff will be able to cut and feel less (or no)
pain. Unfortunately, this manager will probably also be praised for
his or her ability to weather the storm.
One of the quickest and most equitable methods of determining
headcount requirements is development of staff models. These models
determine the required time to complete the current workloads and
then determine the required number of employees necessary. The
models also take into account vacations, sick time, overall staff
experience, volume fluctuations, and supervisory personnel. Staff
models also yield the invaluable benefit of being able to forecast
future staffing needs based on workload volume increases or
decreases.
The result of implementing staff models will be the true
identification of "fat" and the ability to trim costs with the least
negative impact on productivity and service. Companies that have
implemented staff models rarely, if ever, resort to across the board
cuts because they have the ability to focus on areas where cost
reduction is deemed appropriate. In fact, many companies that have
long utilized staff models do not look at headcount reduction as a
first solution when crisis times arise.
The Robert E. Nolan Company has a 35-year history of helping
companies develop simple, yet effective, staff models. If your
company is looking for ways to reduce expenses in an equitable way
we can help you pinpoint where they exist. Remember, across the
board headcount reduction is not a strategy; it is, most times, a
knee jerk reaction. I welcome the opportunity to discuss these key
issues with you as you confront them. Please email me at bob_grasing@renolan.com or contact me at
800–653–1941.
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