Cutting Costs Across the Board:
A Necessary Crisis Strategy?
By
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.
