With a recent cost survey by Deloitte showing that 88 percent of companies will be pursuing cost-reduction measures over the next 24 months, effective cost strategies have never been in greater demand. As part of Naseba’s ongoing effort to meet this demand, we’ve researched and summarised 10 key strategies to help your organisation cut costs effectively.
- Adopt a long-term mindset
Too often, cost-cutting is only implemented as a short-term solution to an immediate crisis – and once the crisis has passed, organisations abandon cost restrictions and fall back into previous spending habits. Pursuing sustained cost optimisation requires a series of long-term goals. Ask yourself if the changes being implemented as part of your cost strategy are truly sustainable beyond the next financial quarter. And if the answer is no, rework these strategies until they can be sustained over the long term.
- Have a clear, realistic target
Cost-cutting initiatives should never be a general endeavour of “lowering costs”. Before mapping out exactly how your organisation intends to cut costs, ensure that you determine exactly how much you’re aiming to cut. Is your goal to see a 10 percent decrease in operational costs by the end of the next fiscal year? 20 percent over the next quarter? This goal will determine exactly how drastic your cost-cutting measures need to be – which will prevent both the over-enthusiastic cutting of essential costs, and a failure to meet the minimum cost reduction needed to keep your business profitable.
- Leverage your existing client base
Asking your existing clients for referrals or recommendations is a cost-effective way to expand your client base. If your organisation has spent years building goodwill and a reputation for providing quality service, but you’ve never reached out to your client base for referrals, then this is the time to use that unspent stockpile of social capital.
- Ensure your staff is working efficiently
Inefficiency in the way that your staff members carry out their duties could potentially be costing your organisation thousands of dollars per year. Are mission-critical tasks being prioritised above other tasks – especially the ones that cost more time and energy than is justified by their actual value to the business? Is there any unnecessary overlap among the duties of staff members? Are there any tasks or projects being handled by two or more people, when they could reasonably be carried out by one?
- Cut non-critical team activities and benefits
Eliminating all non-critical team activities is a drastic but often necessary step as part of an effective cost cutting strategy. Although activities like office holiday parties, team-building outings and charity walks can be important tools for boosting morale and retention among staff members, they are also often first on the chopping block when cost-cutting season rolls around. Sometimes it can be possible to keep these activities by shopping around for vendors with more attractive prices, or combining two events into one – but for truly efficient cost-cutting, your organisation must be prepared to say goodbye to them entirely.
- Consolidate, consolidate, consolidate
Any outside resources used by your organisation, including event venues, trainers and freelance designers, can be utilised more cost-effectively by ensuring that you maximise the time spent on these resources. For example, rather than scheduling a training program for a department of three, find out if any other departments in the organisation are planning to undergo a similar program – and then negotiate a better price for the training course based on the higher number of attendees.
- Review all discretionary and miscellaneous spending
Too often, when an organisation establishes a policy of treating clients to expensive lunches or in-demand tickets to a high profile event, this policy is carried out even in times of financial distress. This is often due to miscommunication: the staff members responsible for this spending are not always told, in clear terms, that it needs to end or be significantly reduced as part of an organisation-wide cost cutting program. Your organisation needs to not only clearly communicate new guidelines for discretionary spending, but also the expectations and consequences involved in following these guidelines.
- Re-evaluate your office space
Take a good, long look at the office space your organisation is currently renting. Is it the appropriate size – or could you manage to house the same number of staff members in a smaller, more affordable space? Would your organisation benefit from moving to a similarly sized space in a more affordable neighbourhood or building? Are you managing the use of utilities in the office to minimise your electricity and water bill? The basic, day-to-day expenses involved in renting and maintaining your office space can often be the easiest expenses to cut in times of financial distress.
- Go green
Following on from the previous point, energy-efficiency often goes hand in hand with cost-efficiency, and this may be the right time for your organisation to embrace solutions that are friendly to both the environment and your budget. Switching to energy-efficient lighting is an obvious example of this, as is pursuing a “paperless” office, which could potentially save thousands of dollars through something as simple as an office-wide ban on printing anything that could reasonably be reviewed or disseminated digitally.
- Seek professional cost management advice
Though it may seem counterintuitive to hire a consultant or pay for a training course as part of a cost-cutting initiative, seeking the help of trained professionals is often a quick and effective route to ensuring that your organisation does not waste valuable time and resources on a cost-cutting strategy that may be doomed to fail. As noted earlier, effective cost cutting achieves a very careful balance between cutting too much, and not cutting enough – and that balance is best achieved through the guidance of an expert.
On 6th December,2016 in Dubai, Naseba will be hosting a training course in Organisational Cost Reduction.