Cost Cutting: How to Do It Right
In the magazine article published in Fortune, written by Ronald Henkoff, focuses on the past present and future of cost cutting. At the time the article was published the “Nineties” had just begun. Businesses had cut cost the past decade and were projected to continue slashing the workforce. Different businesses chose different approaches to why they chose to downsize employees. However, companies that cut the workforce to save on cost noticed that they could never seem to cut cost enough. Corporations noticed downsizing only led to more downsizing. The initial benefits of payroll cuts seem to still net zero change due to other issues caused by downsizing within the company. This vicious cycle was neither solving company budget issues nor leaving surviving employees content. Budget cuts in the past and present were not going to solve the issues. Something needed to change heading toward the future. Indeed corporate America at the time was overstaffed and overmanaged, and downsizing was inevitable. However, the process of downsizing needed to change. The article mentions several successful companies during this time knew the cost cutting process had to change and were accomplishing it. These successful cost cutting businesses understood that downsizing not only effected the individual, but the company as a whole. Downsizing affects the whole quality of decision making. Employees are always looking over their shoulders. Managers and executives put training, maintenance, and new business ideas on the backburner.
Many businesses would seek outside consultants to try and achieve effective cost cutting. Successful businesses Kodak, US West, Oryx, Colgate, Heinz, Square D, and others were taking the necessary steps to be more efficient and effective. For each business there were different ways of cutting cost. Many businesses found that how employees spent their time was managed poorly and found work overlapping. Businesses found ways to cut cost activities internally by trimming the number of signatures, amount of internal reports, and allotted time to produce budgets. These companies focused more on cutting useless work and getting the most out of each employee. Improving quality does not necessarily correlate to spending more money. A company’s investment in spending money on training employees and hiring quality engineers can offer higher returns. Empowering the people was a new trend that was seeing success. Kodak offers an example in the article of an employee who three years ago ran a punch press eight hours a day. Now that same employee is a part of a team and is active in statistical process control, meets with suppliers, interviews prospective recruits, and helps manage just-in-time inventory. A more effective use of manpower and brainpower of employees can save a company millions of dollars. The old approach of underestimating the employee is gone, and managers are discovering the human element can make a great deal of difference in an organization.
I was born the year this article was published, and I know many companies have adapted to this new way of cost cutting. Our world is now heavily focused around continually improving organizations. For example, Industrial Engineering degrees are offered at most universities now. This is a relatively new degree that is mostly geared toward manufacturing, but its practices are becoming common in businesses too. Industrial engineers find ways to eliminate wastefulness in production processes. They devise efficient ways to use workers, machines, materials, information, and energy to make a product or provide a service, which saves the company money. I have worked as an Industrial Engineer in a manufacturing plant, and have seen just how much small everyday improvements can cut cost. I have also seen how this idea of efficiency is becoming common in the business world. I had the opportunity to work for a corporation as a Continuous Improvement Analyst. My objective was to conduct DILO (Day In the Life Of) studies, examine cost of quality, and implement standard work. I find it ironic how downsizing has led to new ways of cost cutting, and new ways of cost cutting has created many new jobs. Many organizations seem to have figured out how to improve cost cutting methods. I am thankful for the way the improvements have directly affected my life through job opportunities.