8 Steps to Immediately
Reduce Workforce Costs
Steven T. Hunt, Ph.D. & Bob Phillips
Current economic conditions are forcing many companies to significantly
reduce workforce operating costs. While reducing workforce costs is often
necessary to keep companies financially solvent during difficult times,
if done poorly it is just as likely to exacerbate an already difficult situation.
This Executive Brief outlines 8 steps to quickly and effectively reduce
workforce costs, while minimizing the negative impact on your business.
Downsizing is never easy, but if done effectively it will
allow your company to survive a down economy. Here
are 8 steps that will help you make effective, efficient
decisions to immediately reduce workforce costs:
1. Cut spending first before headcount.
Companies that reduce discretionary spending first — thus minimizing headcount reductions — tend to
significantly outperform their competitors over time. Downsizing your core, productive workforce is
like cutting into the “muscle” that runs your company. It may be necessary to survive lean economic
times, but it will impact and probably decrease the performance of your company for a considerable
period of time. Workforce reductions tend to be difficult and expensive, and frequently do long-term
damage to a company’s culture, knowledge base, and morale. They are best viewed as the last resort
for reducing costs, not the first. Instead, ask employees if they will make temporary concessions — like
time off accrual policy reductions, unpaid leave, salary reductions, and shortened work schedules
— rather than undergo layoffs. A cost cutting survey is an effective mechanism for identifying costs that
can be eliminated and aligning the company behind these cost cutting efforts. Make it clear that the
cuts are being made so the company can avoid having to make staff cuts. But do not promise that
workforce reductions will not be necessary.
2. Upgrade and optimize the workforce, don’t just reduce it