Have you ever been told that you need to “do more with less”? I have. And I think this has become more prevalent during the COVID pandemic where many organizations continue to be short staffed. But honestly, this was always a thing. Companies have always had cost-cutting programs where they think they can reduce headcount and continue to be just as productive or even more productive. Sometimes, they use new technology as an excuse for the headcount reduction. (Robots anyone?) This often occurs when business starts to slow a bit and management panics and goes with the easy fix: downsizing. A common excuse for doing this is short-term thinking where they need to “make the numbers” for the month or quarter and cost reduction is the only way to make the math work out in their favor. And if somewhere down the line things pick up again, they are very slow to hire and instead ask everyone to, you guessed it, “do more with less”. Western management tends to treat the front line employees as expendable commodities that can be terminated to cut costs whenever it is convenient. I was at a company recently where their workforce was mainly temps by design just so they could be easily let go after a surge in demand has passed. A manager at that company complained to me that they were experiencing a surge in demand but that they “just can’t seem to hire temps as easily as they used to”. Hmm, I wonder why?
In traditional Japanese companies, managers only terminate line employees as a last resort. For a public company in financial trouble, the first step is to cut the dividend. The next step would be to reduce salaries and bonuses of top management. The third step would be further reduction for top management. The fourth step is to ask for help from line workers. They might ask for some to take early retirement or a furlough. The fifth step is to reduce pay for line workers, but not firings. Firing occurs only if there is no other way to prevent bankruptcy. They understand that the workforce is the lifeblood of the company, and that the financial predicament is the fault of poor (risk) management, so they should bear the brunt of the financial impact. How did Western companies get it so backward? Why should front line employees pay for the mistakes of poor managers?
Here’s the bottom line: Doing more with less doesn’t make long term sense. You may get away with it for a while, but when it bites you, it will bite hard. There is only so much cost cutting you can do. This is a small lever. A better plan is to do MORE with more. By MORE, I mean a LOT MORE. Instead of trying to prop up the bottom line with cost-cutting, focus on improving sales and returns on investment. Instead of “saving” $1,000, invest $1,000 to make $2,000 or $5,000 or even $10,000! Yes, I understand potential cash flow constraints, but I still believe the go to play for most companies is cost cutting when it should be investment.
Savvy money managers follow this advice from Warren Buffet: “Be fearful when others are greedy and greedy when others are fearful”. This same approach can be used by businesses. Instead of laying people off when business slows down, double down on retaining talent. Heck, even try to pick up new talent from companies that are laying people off. This will make you much more able to take advantage of the next uptick and bury the competition. The term “reserve capacity” comes to mind. If you wait to hire after the surge is already occurring, you will not be able to catch up and you will likely miss the peak of the surge. But hey, at least you controlled your costs.
BTW, all you managers out there who are having trouble hiring and/or retaining good people right now, are you putting all the stress from being short staffed on the people that have stuck around? Keep it up and you might lose them too during this Great Resignation.
Don’t do more with less,
Dave