For countless organizations, cost reduction remains an overriding business imperative. But too many employers continue to swing the budget ax without seeking employees’ suggestions for what and where to cut.
That’s sapping employee morale and could create backlash that will haunt employers when it hurts the most—when business rebounds.
It doesn’t have to be that way.
While the economy is steadily improving, experts predict that true recovery may not arrive until sometime next year. That means cost cutting will continue to be an ongoing task for you and your organization’s decision-makers.
Executives and HR often make cost-cutting decisions and only then inform employees through surprise announcements that spark resentment. The anger can linger and drive employees to seek jobs elsewhere as the economy gradually improves.
To cut costs in ways that have the least impact on retention and productivity, take the following steps that experts recommend for including employees in the decision-making:
• Hold an employee meeting or send an e-mail to communicate that the organization must cut costs. Explain reasons for the cuts in ways that employees can understand. Examples: Cuts are needed to increase profit, lower overhead or prevent cutbacks in work hours.
• Ask employees to send managers their thoughts on cutting costs in their departments and the organization as a whole. Request ideas that support the organization’s mission and strategic goals. Because employees are closest to everyday business operations, they may deliver suggestions that executives and HR have missed.
• Illustrate how failing to cut costs may affect employees in various departments. Make workers feel they’re part of a team that must share sacrifices to help steer the company through a recovering economy.
• Don’t ask for cost-cutting ideas while assuring employees that the organization is financially healthy, and that deep cuts won’t be necessary. Employers that must later backtrack on such assurances can undermine the credibility of executives and HR.
• When announcing the cuts, include goals for each division or department. Ask managers to work with their staffs to implement the cuts. Spotlight and thank employees who submit cost-cutting ideas that the organization will implement.
Downside: Soliciting input from employees could backfire if they believe the suggestions are ignored or implemented late or halfheartedly.
Remind employees that the cuts aren’t necessarily final and may be restored at some point if business improves along with the economy.