Why just cutting costs doesn’t always give businesses the best outcome

Ensuring that your business has the lowest costs it can have is a given.  However, just cutting costs without thought or consideration for how costs are cut is not good.

When managers/leaders say they won’t spend on the improvements you need to do a job well, they are creating more problems and potentially incurring more costs than they are looking to save.  Cutting staff creates an even bigger problem.

Poor productivity and efficiency upsets and de-stabilises the workforce. Cutting staff puts more work onto the remaining staff, further upsets them and can increase staff turnover.  Here’s an example that I saw many years ago:

In a past role, I identified that we weren’t getting the best out of our CRM.  I discovered that only 5 out of 100 people had had training to use the system optimally. This was 5 years earlier! I contacted the CRM provider for a price for the training.  I then asked for a discount on their price considering so many people were to be trained. They reduced their price by 50% if our staff were trained on their site.  On discussion with the FD, he responded negatively.  He just couldn’t see the benefit of spending money on the training.

A few days later, the CEO asked me how everything was going so I told him that most of the staff hadn’t had proper training on the CRM and this was impacting their output.  I mentioned the quote and the 50% discount I’d obtained and he was shocked that the FD wouldn’t support the cost of the training. A few days later, I received a purchase order and was instructed to arrange the training.

A manager and a few staff went on the initial training session so that we could gauge how much impact the training would have.  Their enthusiasm from their new acquired skills was evident and their comments were extremely positive.  Their learning was put to use and some benefits were realised immediately.  The rest of the staff were trained over the next couple of months. Everyone was amazed at how much more they could get done in the same time. They were all able to help and support each other, plus they could cover holidays, sickness, etc. ensuring continuity. They were much happier, felt less stressed and staff retention increased. The staff started to talk with each other about how they were working better, they shared more information and productivity increased further.

The cost of the training went against the bottom line in that year but the benefits of the training were realised for many years. The staff were happier, productivity went up, sickness went down and information was available for all to share.  A much more productive and efficient working space was created.

So why do managers/leader continue to see training purely as an expense? Why do they not see the benefits of enabling the staff to work in a happier and more cost-effective way?

Whilst it can cost more initially to train people, the right training can ultimately reduce costs by reducing inefficiencies. Looking at increasing productivity and improving efficiency is a far better way to reduce costs and the gains are higher.