Are there alternatives to layoffs? Sure—eliminating unproductive practices and procedures can quickly reduce costs and make your company more efficient. The key is identifying the right practices to eliminate: those that have an immediate impact on spend rates. Here's how.
Do you fear that layoffs are in your company's near future? Try eliminating unproductive practices and procedures first.
"We have to dump the work that doesn't contribute directly to product quality, customer satisfaction, employee benefit, and shareholder value," said General Electric's chairman Jack Welch when he launched the company's Work-Out program in 1988. "We have to shed the work that works against us." Welch's insight is particularly relevant today. Trying to find a way out of the current economic doldrums, companies are emphasizing the need to be more productive. And yet organizational clutter still abounds. Loose ends remain from prior initiatives that were never brought to full closure, and duplication is rife.
A quick-hit cost program can have an immediate impact on spend rates simply by identifying and eliminating the practices and procedures that waste money. Sometimes the cost savings are obvious. For instance: Spike the report that no one reads, get rid of the checks and balances that add no assurance or security, and put a halt to momentum spending—outlays that continue long after their rationale has vanished. Other examples of quick-hit cost savings, drawn from our work, include a retailer that saved $400,000 by halving the number of physical inventory counts taken each week; a "superstore" retailer that saved $440,000 by slightly upping the discretionary expenditures a store manager could approve; and a financial organization that saved $100,000 by simply clarifying who within the company received invoices.
None of these examples involve reducing the head count or making significant investments of cash and capital. In fact, most quick-hit savings result from simply stopping work that makes no sense. One such program identified 50 potential cost savings; eliminating tasks accounted for 78 percent of the total savings.
Where do you find quick-hit savings? A description of three proven forums, with examples of their utility, follows.
1. Bureaucracy busters. These bimonthly meetings of cross-functional managers focus on finding and rooting out unnecessary procedures, forms, and layers of oversight in all operating functions. Meeting participants identify the studies, reports, analyses, investigations, and approvals that have become routine and repetitive—and summarily stop them. Nothing is taboo. Bureaucracy-busting meetings at one airline killed a monthly 300-page report when it was discovered that the same information was readily available elsewhere.
2. Work-Out sessions. At GE and other companies, these facilitated meetings, lasting several days, enable frontline personnel to (1) identify improvements in productivity, efficiency, and effectiveness, (2) develop action plans, and (3) gain senior-level commitment to improvement on the spot. Work-Out sessions deliver quick and clean outcomes to the committed organization, but they're not for the faint of heart. If you're not willing to act quickly, don't waste your time on them. One manufacturer used Work-Out sessions to reduce the number of signatures needed for an authorization request from 19 to 6, halving the time and cost of the entire authorization process.
3. Delta task forces. These initiatives are typically commissioned by senior management and make use of cross-functional teams and external support to systematically review and streamline procedures that develop following the introduction of new technologies and business processes. Participants are often rewarded with bonuses that reflect some portion of the savings realize from their efforts. After installing ERP software, one finance department identified five quick hits that together delivered $940,000 worth of immediate cash savings. Four of the hits resulted from simple changes to standard operating procedures.
For maximum benefit, a quick-hit program requires five key organizational and individual ingredients:
- Support and license from senior executives,
- Incentives for involvement and participation,
- A short time frame for analysis and action,
- The predisposition on the part of managers to listen first and then act, and
- The willingness and ability to step back from day-to-day operations and reflect on how your business should operate.
When times are good, a quick hit is a lot like a quarter lying in the street—most people won't stop to pick it up. It's only when conditions sour that the quarter shines brightest. Properly planned and executed, a quick-hit program will produce savings that far exceed the initiative's costs. Just as important, quick hits give employees the opportunity to help cuts costs, not heads. With layoffs at their highest levels in a decade, that boost to morale alone makes quick hits a smart choice right now.
James Powers and Michael Connor are directors of Meridian Consulting in Boston.
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