Is Efficiency Gained or Lost in Cost Cutting?

Cost cutting measures, particularly those taken during downturn, have always been seen with a degree of cynicism by employees. ‘This won’t work’ is the usual comment heard everywhere. Towers Perrin’s survey [excerpt quoted below] identifies three possible reasons why employees think that efficiency has also taken a nose dive.

“…… with promising signs of improving economic fortunes, companies face a stark reality check,” said Max Caldwell, a Managing Principal of Towers Perrin and leader of its Talent Management practice. “Did they improve efficiency? And,if so, was it a temporary response to crisis – or is it sustainable? Based on views from people doing the work, the jury is still out on both questions.

“There`s no question companies aggressively cut budgets and head count over the last six months to improve productivity and streamline management structure and processes,” Caldwell continued. “And, in the short term, that approach has worked. But as `normal` routines begin to reassert — even with leaner structures in place — employees have begun to perceive that efficiency has actually slackened. Our experience suggests that three factors may be at play here. First, companies have eased off on the frequency and intensity of messages about efficiency. Second, customer demand and therefore workload have diminished in the wake of reduced consumer purchasing in many companies, so even with fewer staff, employees may feel underutilized. And third, companies often cut costs and layers of management without aligning the underlying organization structure or fixing how work gets done and how decisions are made. So inefficiencies start to creep back into the system.”

Read the full report here.