Daily Archives: April 24, 2009

The Worst Cut You Can Make

Times are tough. Your sales are dropping. Your costs aren’t. And your balance sheet is bleeding red. You have to cut. I get it. But you DON’T have to cut resources – especially A level and B level talent! As yet another recent article (in Material Handling & Management) points out, cutting talented staff is a desperate measure that diminishes value in the long run.

Not only does it have a severely negative impact on productivity (the drop in morale decreases productivity across the board, which is a double whammy as you no longer have enough resources to get the job done right), but it greatly increases the risk of a major supply chain failure which could bankrupt you. Consider the recent highly publicized peanut recall. According to media reports, Stewart Parnell, president of the bankrupt Peanut Corporation of America, told employees that quality measures were too expensive and time consuming. If you have a sufficient number of high quality resources, you can do quality control in-house cost effectively — but only if you have a sufficient number of high quality resources, which you won’t have if you go around indiscriminately cutting your workforce without regards to the total cost to the business.

Furthermore, I’ve never encountered a situation where there wasn’t a better option. Not that long ago I was talking with a colleague at a consultancy who spent weeks working out a 500,000 productivity improvement that would be realized over the next 12 months and cost the company less than 50,000 to implement. Instead, the company chose to reduce costs by cutting a 45,000 resource (which prevented them from undertaking the initiative). All I can say is where’s the logic in that? Especially since the company *guaranteed* the savings and was offering a contract where they wouldn’t get paid until the savings were achieved. (Save 4K a month at the expense of 40K a month? That’s just dumb.) And I hear this story day after day and week after week from consultancies that identify 500,000 to 5,000,000 (or more) but the customer won’t pull the trigger because it will cost them a few thousand of expenses up front. (And I mean a few thousand, most of the bigger consultancies these days, and even some of the SaaS solution providers, are willing to offer results-based pricing where you don’t pay consulting fees until the contract is completed or until you realize the savings necessary to cover the consulting fee.)

So don’t cut head-count. Use them to tackle 3X, 5X, 7X, and even 10X ROI opportunities that will help you get back to the black before you bleed to death.

Top 10 Reasons That Good Employees Quit

A recent article on Material Handling Management on-line which noted that, according to the U.S. Department of Labor and Statistics, turnover can cost an organization 33% of an employee’s total compensation was kind enough to summarize the top 10 reasons good employees quit. It’s an important read because they’re all preventable, and keeping good employees not only lowers costs, but it maintains morale … and a happy employee is a productive employee.

  1. The Job Was Not As Expected
    The job changes from the original description to something else. The employee, who believes that his new employer played a bait-and-switch game, wonders what else the company lied about and seeks greener pastures.
  2. Work Life Imbalance
    Forcing your staff to pick up the slack when a project’s behind, when a team-mate departs, or when you just finished a right-sizing might look like a great cost-savings opportunity, until your employees get tired of 60, 70, and 80 plus hour weeks and decide to stick it back to you.
  3. New Hire Mismatch
    Square pegs don’t fit in round holes. ‘Nuff said.
  4. Management Freezes Raises and Promotions
    Generally speaking, money isn’t the top reason someone takes a job or the top reason someone leaves one, but if an employee can earn 15%, 20%, or 25% across the street …
  5. Feeling Undervalued
    No one wants to feel less useful than a door-stop. A little praise for a job well done goes a long way.
  6. Lack of Decision-Making Power
    No one wants to be micro-managed, and there’s no need to micromanage a good employee who was hired because she can do the job better than you in the first place.
  7. Not Enough Coaching/Feedback
    Good employees want a career path … and want help getting to the next level.
  8. Management Lacks People Skills
    Not only do people not want to feel like doorstops, they don’t want to work for them either. Make sure that your managers are properly trained and developed, or they might just cost you your best employees.
  9. Too Few Growth Opportunities
    If there’s no career path within, your employees will look for one without (you).
  10. Lost of Faith and Confidence in Leaders
    Make sure you always do the right thing.