Across the board cuts are lazy
There’s a lot of cost cutting going on these days, much of it necessary, appropriate and beneficial.
But the worst kind of spending reduction– one you should avoid yourself and be suspicious of in others– is the across-the-board cut.
Across-the-board cuts are lazy. They are also irresponsible.
A few months ago, an executive attending one of my workshops said, proudly, “I’m cutting all of my salespeople’s travel budgets by 50%.”
I asked, “Why all of their budgets, and why by the same amount?”
What if this executive has one salesperson who is incredibly effective in face-to-face meetings with customers? Maybe it makes sense to increase this person’s budget, and tell him to stay away from the office. Perhaps another sales person is particularly good on the phone. Cut his travel budget by 75%.
Here’s another example of lazy, broad-brush, across-the-board cost cutting: A company announces, “All departments will reduce headcount by 5% in light of the current economic downturn.”
I hear this and I want to ask a similar question to the one I asked above: Why all departments, and why all the same amount? Maybe the best way for this company to deal with the economic downturn is to double the size of one department and slash another department by 50%.
Since they are bad business decisions, why do business people make across-the-board cuts?
One reason: Bunker mentality. Many executives use business stress as an opportunity not to think. “We’re taking a lot of fire here, getting shot at from all directions, we better just hunker down, cut back, and ride this thing out.” (“Isn’t it a relief,” says this executive to himself, “with all of the pressures hitting us from the outside world, to have an excuse not to deal with all of this thinking and strategy stuff?”)
Another reason: Not being “fair” is uncomfortable. Executives often use across the board cuts as a way to avoid the difficult, uncomfortable, fidget-worthy process of saying, “Bill, I’m cutting your travel budget by 75%. Julie, I’m doubling yours.” Or, “Fred, you need to let half of your department go. Jim, you better start hiring, quickly.” It’s so much easier to treat everyone the same, but it’s really bad for your business.
The big reason: Laziness. Thinking is hard. Many people avoid it. Those who don’t avoid thinking are much better equipped to deal with the current state of events– whether that be a slight economic downturn or a full-blown economic recalibration like we are now experiencing.
Your business is a complicated beast trying to thrive in a complicated, pressure-filled, ever-changing world. If you want to have the agility to navigate this world, you need to practice discernment, deliberateness and deep thinking in order to recognize the different values that each part of your business contributes. Now is a time when it is critical to make optimal allocations of resources, because resources are tight. When you look beyond the across-the-board cut, you look at the unique values of each of your resources, and you can nurture – or cut – those resources in a sensible way.
As I wrote at the beginning of this article, you should be suspicious of across-the-board cuts. They are usually a sign that the people making the decision to cut haven’t thought hard enough. Most importantly, question yourself if you find yourself making broad-brush, generalized spending cuts. If you sharpen your thinking, and recognize that your business is made up of many different components that each contributes a unique value to your company, you will put yourself in a much better position to thrive in this time of economic turmoil.
This topic isn’t new to me. Here are more resources to help you avoid the pitfalls of across-the-board cuts:
No matter how many costs you cut, they can only help so much. Your business needs its own stimulus package.
Listen to my 2009 Readiness Teleseminar and download the workbook.