SMASH! We put the idea of cutting expenses to survive a downturn in the BiZPhyZ Business Collider and got some very interesting results. SMASH!
Slow. That is the operative word in business. Slow.
Businesses have cut back to reduce expenses. Cut cut cut. Cut to conserve. Cut to survive. Cut to ride it out.
Cut cut cut. Good idea, right?
Well, maybe. Maybe not.
All businesses have a baseline of income/expense ratio needed for survival. As income falls, it is obvious that action needs to be taken to either raise income or reduce expenses. The goal of the first phase of cutting is to attempt to remain profitable. That only lasts for a quarter or two if at all.
Round two of the cutting is all about trying to remain even.
Round three is to control the bleeding. Cut cut cut to survive as long as necessary.
Round four, if the business can make it to round four, is reorganization. The business will try to escape obligations and commitments. More cutting. Cut cut cut. At the end of this process, the business will emerge as a shadow of its former self. The logo will remain the same, but the operation of the company will be very different. Facilities close. Cut cut cut. Management will put a happy face on the “newly reorganized and stronger” company. But the damage is done.
SMASH! SMASH! SMASH!
When it’s time to tighten your home budget, do you cut out food? Heat? Gas for the car?
You may pay attention to those items but you don’t cut them out. You might cut back a little, but certainly not completely. Instead of steaks, you buy chicken.
Looking closely at what those items are gives us an important business tip. Food, heat, gas are all energy items. They are the fuel that runs the family.
What is the fuel that sustains a business?
We could make a list of fuels necessary to keep a business going. We could use a measurement system like calories or BTUs and assign values to the energy inputs at a business. (Stay with me)
Here’s what we discovered when we looked at cut cut cut.
Cutting starves a business.
Sure, it is necessary to make some cuts. So stipulated.
But rarely do I see a business that off-sets cuts with alternative energy inputs. There’s the secret to survival and faster recovery!
Every business has an idea pool. A talent pool. A people energy pool.
As businesses cut, it is also common to shut down the input (energy) from the remaining talent!
When businesses cut, rather than tap talent for ideas and innovations, management almost always takes a “put your nose to the grindstone” approach. They want more ‘work’ from fewer people.
Stress rises. Fun goes out the window. Communication withers. Morale drops.
Wait, morale drops? Yes. And so does productivity.
Cutting reduces the energy going in. A smart business can open new energy sources locked up in the shale of their employees.
Have you ever heard of a company while forced to make cuts, strives to make things better for the talent retained? Nope. Why? (Note: nearly all managers think they make things better but they don’t.)
SMASH! SMASH! SMASH!
This old, dated notion of “nose to the grindstone” must go. It is stupid and destructive. People want to be valued and they want to produce. They want a road to more.
Want to kill productivity? Tell anyone working for you that no matter what they produce, they won’t receive a nickel more or even a crumb of recognition. Tell them they are lucky to have a job.
Right now, most businesses are at stage two or three. I can assure you that a business at stage two of cutting will get to stage three and the threes will fail or fall to stage four. The economy is not going to get better any time soon.
Then why bother!?
Attrition. Today, you are probably in a very competitive market. If your business increased market share, wouldn’t that be great? As competitors fail to deliver, wouldn’t it be great to grab market share from them? Yes.
Most of the time business is not a zero-sum game. However, in a seriously depressed economy, your market may be zero-sum. (Note: Zero-Sum means my gain is your loss. Generally new innovation expands the total market but not when the economy is suffering) Seize market share through building your internal energy.
Think. Aren’t you really pleasantly surprised when you receive a very positive service experience?
When people are really ‘up’ it has an effect on buyers.
Build morale.
The more you must cut, the better you must make it for the remaining talent.
It doesn’t cost money and it will pay off.
You know what to do. Get on it.
Chris Reich, BizPhyZ
FW45