December 22, 2008

There are two ways to approach cost-cutting exercise. Either cost-cutting measures are thrust upon employees or employees are actively engaged to deliberate, discuss, suggest, and implement cost-cutting measures.

When cost-cutting measures are thrust upon employees, it feels like burden and chances are high that general resentment sets in. This may lead to disenchantment among employees and can affect the productivity negating the benefits of cost-cutting exercise.

For making any cost-cutting exercise become a success, employee involvement and engagement is vital. This must be understood by the top leadership team. Instead of thrusting upon a slew of measures down the line, the leader must tell all employees why frugality is the need of the hour and invite their suggestions to cut costs without affecting the needs of business or the morale of employees.

Explaining the business scenario and inviting the employees to participate in the cost-cutting exercise has many benefits.
  1. Employees get a clear picture of what is happening and what may happen. This removes confusion and drastically reduces chances of rumour mongering.
  2. Employees feel important and valued. This leads to commitment to implement cost-cutting exercise earnestly.
  3. Being close to where the action lies, employees are more likely to come up with ideas and suggestions that may help the company significantly cut cost without throwing the axe on something necessary.
  4. Employees feel engaged in the affairs of the company and develop higher level of empathy to connect with the prevailing business scenario.
In these times of economic distress, CEOs and business leaders should take it upon themselves to coalesce the company around their employees and jointly chalk out strategies to fight tough economic times. It would go a long way in not only fighting cost in the short run but also in actively engaging the employees to create a unified cohesion in the long run.