By Francis J. Kong
(The Philippine Star) Updated January 07, 2012
There
was a notice on the fence of a small church graveyard: “It is to
everyone’s interest that cost-cutting measures should be initiated
during these difficult times.
As the maintenance of the churchyard is becoming increasingly costly, it would be appreciated if those who are willing would clip the grass around their own graves.”
Many of my clients had a wonderful year. They had exceeded targets,
attained growth, and even developed new products in the pipeline. They
are excited with the prospect of 2012. God had blessed me with a
wonderful year as well, and this year promises to be even better.
But then again, some businesses did not do as well last year, so belt-tightening measures are now in place this year.
This is the reality of business: It is seasonal, and it is cyclical.
Cost-cutting measures are usually taken when times are tough, but
actually cost-cutting measures should always be in place even when
times are good. This is called fiscal prudence.
So budgets are cut. No more traveling business class. Or stays in five-star hotels. Or traveling for that matter since video conferencing can just be done. And then, of course, certain programs are also cut.
I thoroughly understand this. I have been an entrepreneur all my life, still am today.
When
the figures go down radically, the only solution seems to be to cut
costs. And this is done in five ways: (This is especially true for huge
business organizations.)
Across the board reduction in budgets by 10 to 20%
Elimination of a product range
Closure of the business in a geographical area
Elimination or outsourcing of a support service
Reduction in discretionary budgets such as marketing, research and development, training and travel
The short-term results from cost-cutting are good. Immediate effects
can be seen; in most cases, margins increase. So “spill and fill”
becomes a norm. “Privileges” and “old” costly practices are stripped
away from employees. Structures become flatter and flatter. Individual
responsibilities become broader and broader.
Geographic control and
control of processes become broader for leaders. These are all good for
the short term, but not for the long haul.
Nobody shrinks its way into greatness. A business should not just
focus on cost reduction – it needs to focus on revenue generation as
well. And that needs a lot of think time.
But for the meantime, extreme cost-reduction measures may be the
reality you will have to face. The question now is, how do you cope?
The worst thing to do is to feel totally hopeless now that they have
cut your budget. When training budget is greatly reduced, does this
mean you stop training? That’s absurd! You find your own resources and
continue with your personal, non-stop education
and training programs. Just because the company will no longer sponsor
you in seminars doesn’t mean you can stay idle, flop, and pass on the
blame to the company that is “no longer making you grow.” Growth is
your own responsibility, not your company’s.
This is one of those precious times when you need to make some
personal sacrifices, help out the business organization, and continue
learning on your own. Leaders, at this point, will have a great
opportunity to set examples of sacrifice and service, and in doing so,
inspire the rest of the organization to follow suit.
Trying times are not the times you stop trying. In every difficult
situation, you can look at what you’ve lost and be hateful, or you can
look at what you have left and be grateful.
Contentment with godliness is great gain.
So your budget has been cut. So what?
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