For any major change, staff engagement is important, but for cost saving it’s absolutely essential. All meaningful cost savings create change. Savings in input costs may impact specifications or consumer choice. Savings in operating costs almost always require a change in employee behaviour, and quite often a degree of pain.
Driving through large-scale cost savings without employee engagement is not only self-defeating, but can do significant damage to the organisation and the brand – after all, they are the ones who serve the customers and have to manage the implications. I couldn’t ask for a better illustration than the one I got on a mid-morning train to London two weeks ago. We had not long left Nottingham station, when I heard an announcement:
“Ladies and gentlemen, I apologise for the lack of restaurant facilities on the train today, this is due to East Midlands Trains new staffing policy”.
A similar message came over the speaker a number more times as we passed more stations. Each time, the silent finger of blame was pointed at the corporation. Later on our “local hero” even extended the message to say:
“…I’m hoping we will be able to open the bar for a short period after we leave Market Harborough, but again, I apologise for the inconvenience this has caused. This is due to East Midlands Trains new staffing policy”.
Not that I had any intention of using the restaurant facilities, I’d already picked up my coffee at the station café, but at least now I knew who the baddies were. So when you’re planning your cost reductions, make sure the people who represent you to your customers are all aboard. Here are five fundamental requirements for a successful cost reduction programme:
Light the burning platform… publicly:
In order to save IBM from collapse in the 1990s, Lou Gerstner had to take out $8.9bn of costs. In his words, “The sine qua non of any successful corporate transformation is public acknowledgement of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change.”
Show the way… compellingly:
The leadership must explain simply, and with a single voice, the scale and severity of the crisis, and what needs to be done to resolve it. This is a logical series of deliverables, and an outcome that employees understand, buy into and can action.
Take the pain… quickly:
Where there are difficult decisions to be made, they need to be taken quickly and clearly. Fast is better than perfect. When it comes to structures the key is clear accountabilities from day one. The alternative is turf wars and politics. When it comes to exiting businesses, get a trusted external perspective and listen to the facts. Every strategic transformation will have some flawed decisions, and almost always they are due to emotional attachment.
Stick to your guns… unflinchingly:
Essential for strategy, fundamental for values. The values and behaviours that are articulated prior to, and demonstrated throughout, a transformation, have a defining impact on the organisational culture that remains afterwards.
Communicate… incessantly:
This commitment starts at the very top and has to be sustained. It may be continual repetition of the key messages, tangible changes that cement belief, spotlighting specific achievements and behaviours, or the creation of myths and legends. Whatever the style, the content must constantly reach out and touch every employee. The minute the communication lets up, the focus will drop, progress will falter and the savings will stop coming.