How to Cut Costs Without Cutting Jobs

Some companies thrive by keeping themselves lean and mean. Business owners and managers constantly look for ways to cut costs and improve their bottom line, and it might even occur to many of them that cutting hours, salaries, or even employees is a quick way to do this. However, this is a dangerous step, and it is bound to have a lot of consequences.

Consider the example of Home Depot, a large home improvement chain. One of the attractions of visiting this local store was the knowledgeable and helpful employees that could help home handymen with DIY projects and suggest products. In an effort to reduce costs, the company began hiring cheaper workers and part-timers who did not necessarily have experience in building, home improvement, plumbing, etc. The lower wages might have looked good on the company’s bottom line for awhile, but it did not reflect well on sales as local people realized they were not getting the extra value of free consultations in stores.

Better Ways to Cut Costs

Consider some better ways to cut costs than firing employees or reducing working hours. Besides the fact that you might be eliminating some valuable workers from your company, layoffs seldom generate positive publicity for your company. According to a Bloomberg BusinessWeek Magazine article, How to Cut Payroll Costs without Layoffs, firing people is bound to take a personal toll and can inflict long-term damage.

Why Not Fire Bad Customers Instead?

This might sound like blasphemy, but some customers really do cost more in time and effort than they are worth. Customers who habitually try to exploit services or buy items only to return them later can cut into a company’s bottom line, and this is particularly true for businesses with tight profit margins.

If businesses can track these customers, they may actually want to discourage them from doing business. This can free up services and even reduce prices for the good customers that every business loves. Consider the example of American Express. They offered some customers $300 to payoff and close their accounts, and they also closed millions of other inactive accounts. This freed them from the burden of “bad” customers who did not pay their bills on time or never used their accounts.

Analyze Your Spending

Just like any family might be prudent to develop a budget in order to figure out how they are spending money, businesses need to do this too. In fact, it might be more important because businesses might have dozens or hundreds of people buying supplies and inventory.

By performing some cost-analytics some companies have realized that they were paying different amounts for the same items from sources in different parts of the country. This knowledge allowed them to negotiate lower prices with all of their suppliers. They also calculated cases where it would be cheaper to pay for shipping from cheaper suppliers than pay higher prices from local suppliers.

Another considerable expense to businesses, especially in terms of hiring, is training. In a digital era, it’s not always necessary to require more experienced employees to babysit new hires. There are tons of tools available – for example, online training videos, especially for employees who need to learn non-proprietary systems. Be sure to look for tools like that prior to having them made or doubling down on labor costs.

In another case, a company paid much more than they had to by licensing multiple copies of the same software instead of purchasing a multi-user license for all of their employees.

Let Your Employees Help You Save Jobs

Companies could provide incentives for employees who figure out good ways to save money and increase productivity that do not actually involve firing anybody. When employees start complaining about certain types of customers, it might be time to analyze that type of customer behavior to figure out how it can be discouraged in the future.

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