How Much Time Will The First Round Of Cost Cutting Take?
How Much Time Will The First Round Of Cost Cutting Take?
Planning for Round 1 of cost cutting can be done quickly, in a matter of a few days. Implementation could take weeks, however, depending on how the company decides to proceed. Realizing the benefits can take longer because some savings come in a stream over a number of months. Furthermore, modifying the retirement program, the 401(k) plan, or initiating a voluntary
severance
plan can require substantial analysis, legal work, documentation, and
mandated
communication. Thus, what may be required is a time-phased plan that outlines the time frame for implementation of each cost reduction strategy along with an estimation of the stream of cost savings over time.
How Much Cost Can Be Taken Out In The First Round?
The 10 alternatives as well as other potential across-the-board cost-cutting measures will make a significant dent in the total cost reduction target. Some companies can stop at this point; others must seriously consider alternative work arrangements and layoffs. The biggest mistake an employer can make is to promise that there will be no layoffs when there may be a need to consider that option down the line. This is why it is critical to perform an analysis of all three rounds before committing to any particular strategy.
A Note On Employee Involvement
Involvement of
employees
in developing cost-cutting opportunities will enhance the acceptance of solutions. This can mean brainstorming sessions, focus
group
meetings, regular staff meetings, suggestion hotlines, or other means the company may choose. Great caution should be taken involving employee input in the successive cost-cutting rounds because of the serious issues at stake, including job security.
Summary
-
Each of the 10 alternatives
differs
in the amount and time required to initiate and reduce cost.
-
Senior leadership should be careful not to make promises it can’t
comply
with since it may then lose credibility at a critical point.
-
A number of cost-cutting alternatives, such as voluntary severence, are fraught with legal and regulatory potholes, so any should be undertaken with great caution and with the approval of the company’s legal counsel.
Chapter 8:
Step 5—Implement Alternative Work Arrangements
Key Principles
-
Alternative work arrangements allow a company to retain critical human capital and at the same time reduce compensation costs.
-
Costs incurred with alternative work arrangements are minimal and are far outweighed by the benefits.
-
Novel supervision and management techniques are required to make alternative work arrangements run smoothly.
-
Alternative work arrangements are not for every employee but for those with critical skills.
The Second Round Of Cost Cutting: Creative Alternatives To Layoffs Are Win-Win For The Company And
Employees
Accenture (formerly Andersen Consulting)
offered
its employees an alternative work arrangement when it needed to cut costs. Workers had the chance to take a sabbatical at a
nonprofit
organization of their choice. Stephanie Braun jumped at the opportunity, even though it
meant
a temporary 80 percent reduction in pay. Braun, then 32, manager of Accenture’s chemicals industry
group
, took a 7- month stint overseeing volunteers at the Fairy Godmother Foundation in Chicago, which grants wishes to the terminally ill 18
years
and older. “It was an incredible chance to focus on something besides work, yet
remain
with the company. I had savings and am on my own so I could afford this,” Braun said. She also used her time off to study to be a docent at the Chicago Architecture Foundation.
For Accenture the idea was an innovative but risky way to cut costs and retain employee talent for the long
term
. Dubbed “FlexLeave,” the program
began
as a pilot for U.S. employees who had worked at Accenture for at least 12 months. Roughly 1200 of 17,000 eligible domestic employees initially signed on for the opportunity. Although they received only 20 percent of their salary, they
continued
to receive benefits and have use of their company laptops.
The Accenture story is typical of companies today that substitute traditional layoffs for
custom-designed
alternatives that maintain an employment relationship with the company at a reduced level for a period of time when business conditions do not
warrant
full-time
employment. The results of such arrangements can be very
rewarding
and motivating to employees like Braun; it also helps the employer maintain its skill base and avoid separation transaction costs.