The axe is not the only tool in the box
Options to shrink the cost base go far beyond simply hacking away at the limbs of the workforce – although of course this would have something of the desired effect on cost. As most will testify, this approach can be enormously destructive to customer experience, progress internally with critical projects and damage the morale and motivation of those who remain. Given the upturn in systems investment, and the vast quantities of data the organisation possesses on people and performance, it is time to be a little more precise.
So why the familiar refrain…
Dear Mr(s) Analyst,
I trust 2016 is treating you well and you are well prepared for another round of forensic examination of my performance as CEO over the last 12 months and likely predicting whether I have what it takes to meet and beat your expectations in the first quarter.
Yes, I know that revenues have been a little stagnant…
Yes, I know we need to become “digital”…
Yes, I know we need to improve margins…
This year though, please don’t keep asking about the costs alone. I am slowly gaining control over this! But what with lead times for technology and automation, entrenched management mindsets and all the legacy issues from my predecessor, it takes time…
You need to see action on the cost base? Fine, I’m going to have to pull the easiest lever I have (again) and announce another round of cuts.
I look forward to speaking on the analyst call.
The Chief Executive
Time to tell a different story
Familiar story? We’ve seen this in the press on an almost weekly basis in the past 12 months (AMEC, Rolls Royce, HSBC, Deutsche Bank, BAE and now Centrica are amongst just a few that come time mind). These same organisations now have the ability to be far more sophisticated in how they respond to margin pressure in their businesses. The answers to how and where to do this lie in data that they already possess.
Up to 5-10% cost elimination without losing an important limb
There is an abundance of evidence that shows that many of the best people in an organisation are likely to leave as soon as widespread headcount cutting programmes are announced – the same people the business really wants to keep.
So let’s start with some basic areas as alternative approaches to shrinking that cost base:
- Current absenteeism in FTSE 100 companies can be reduced by up to 50%. We know where and how to achieve this
- There is evidence that 1% of payroll costs in FTSE 100 companies are wasted on early leavers/staff turnover which are shown to be completely unnecessary
- Almost one third of UK managers were paid bonuses in 2015 in companies that were rated “under-performing”*. This can be corrected and we have proved how to do it by knowing where and why this is happening
Using smart analytics in some or all of these areas can rapidly help the CEO’s management team present them with ideas and opportunities that will help feed the script for the next Analyst and Investor roadshow. And it will show that precision and pace are possible in responding to pressure from the market.
Let’s turn our CEOs into tree surgeons rather than lumberjacks
*2015 National Management Survey – XpertHR and CMI