Adjusting to the new economic climate may tempt you into focusing on additional cost cuts or consolidating pandemic changes to manage cash flow and finances. But it’s worth bearing in mind the law of unintended consequences before you get carried away with savings.
The impact on business quality and, of course, employees is key. Swingeing cuts aimed at removing just the low-hanging fruit may not be the best long-term approach. Measured, early action should mean you don’t get forced into more drastic measures if the business’s cash position deteriorates. A balanced approach to reductions, tempered with some careful investment, should put you in a stronger position to rebound.
Customer experience can easily be adversely impacted when the finance or accounting department is the driver of cost savings. Making these decisions can be tough, and it is all too easy to prioritise internal operations over customer service. However, quality and consistency can easily be affected by short-term decisions, so any risks to customer satisfaction and loyalty must be considered. You may find opportunities to outshine competitors who have neglected their customers by, for example, trimming back after-sales services.
Staff perks may seem an easy target, but you should consider the impact on morale and efficiency. For example, free drinks and snacks mean that employees are less likely to leave the premises during breaks, and they will be more inclined to work late if there is an urgent job to be finished. Cutting the quality of workplace refreshments, for example, can be a false economy, leaving colleagues feeling undervalued when basic pay rises may also feel the squeeze.
When faced with a crisis, there can be a tendency to centralise spending decisions. You might think this makes sense because a tighter control can be maintained over budgets. However, many business studies show the opposite is in fact the case. Centralisation means decisions can end up being made with outdated information and with little awareness of local needs, creating discontent among both customers and employees delivering services.
Front-line staff who see their decision-making powers removed can become demotivated, and this can easily lead to new opportunities being overlooked.
Cost cutting definitely has a role to play but needs careful planning and consideration of all the potential implications. Employees and even customers should be included in the decision-making process to ensure your business remains viable and is in a position to benefit from future opportunities.