dispatches from the new world of work

Be Suspicious of Across the Board Cuts

Yes, I said that. Be suspicious of across the board cuts.

If your company declares, "We are cutting all salespeople's travel by 25 percent," or "Every department will cut staff by ten percent," lift your eyebrows superciliously, and say, "That's pretty stupid."

Making across the board cuts is like going to the bank and asking for five inches of money. A ten dollar bill and a one dollar bill take up the same amount of space, but their value is not equal. Your company does many things, and making across the board cuts ignores that each of these things has its own value.

Maybe some salespeople in your company should double their travel because they are great in person with customers, while others should stay in the office and talk to customers by phone. Maybe certain departments should cut 50 percent of their staff and others should add people.

Now is the time to think! Avoid the temptation to "be bold" and use the budget bulldozer to plow through tough times. Discernment will result in profitable action. Slash and burn will feel good for a few minutes, but in the end, it will cost you.

Don't confuse movement with progress! Do things, and do them quickly, but do the right things. Otherwise, you're really not doing anything.

Steve Yastrow posted this on 01/22/09.

Comments

And, doesn't it seem that the first groups always hit in the "across the board" are the very ones needed most? Like, sales, marketing and customer service. You've got to look at the individuals, the group's (or department's) responsibilities and how it all fits into the overall plan.

Oops, there I go - there often isn't an overall plan. I can remember from my days in Corporate America, sitting in the board room, listening to the CEO "cut heads" with no regard to what the heads did...or what kind of relationship the customers might have with those heads. Caused much problems in the field with very, very unhappy customers. I know, because I was the one that had to go meet with them. Ouch.

Posted by Mary Schmidt at January 22, 2009 12:38 PM

Thank you, Steve, for that. Your last paragraph reminds me of something my uncle told us many years ago. We were complaining that we could not do what all of the other kids were doing. My uncle's response: "They may be moving but in the wrong direction." This has stuck with me. Brash unilateral discussions always concern me.

Posted by Judith Ellis at January 22, 2009 12:58 PM

Steve Ballmer to the white courtesy phone, paging Steve Ballmer to the white courtesy.

Had to say it. I live in Austin, Texas, and all the tech cuts are making me worried for our economy. We were finally rebounding from the tech bubble burst. I am not in tech myself but when tech hurts, all of Austin hurts.

Posted by Constance Reader at January 22, 2009 2:01 PM

Amen X10!

Posted by tom peters at January 22, 2009 2:02 PM

These words need to be repeated until the "powers that be" actually hear them and realize what they are doing to their own companies. Bravo Steve!

Posted by Teri Temme at January 22, 2009 5:18 PM

Totally agree. Another problem with across-the-board cuts is that they follow the "imperial CEO" model rather than using the organization structure to make decisions intelligently.

It is inexcusable, for example, to tell the Sr VP of Sales & Marketing to cut travel by 20%. Give him a target for how many dollars to cut, and let him decide the best way to do it...maybe he'd like to cut travel by only 5% but cut advertising by 50% and get rid of a CRM-implementation project. THe CEO can't possibly have enough information to make these decisions himself.

Posted by david foster at January 22, 2009 5:25 PM

Great post Steve - The best managers always know where the ‘fat’ can be best trimmed … Ooops – My apologies - there I go, using that ‘F’ word again :-)

Posted by Trevor Gay at January 22, 2009 6:33 PM

Unfortunately, discernment is a rare quality these days (or maybe it always has been rare).

That's probably what got us into this mess.

Posted by Amanda Cullen at January 22, 2009 7:26 PM

Absolutely Steve. I push my clients hard to understand that anyone capable of fifth grade math can run a business by the spreadsheet. Cut costs or increase revenue until desired margin is met. Duh

Good numbers in a business should be a symptom of good leadership. Unfortunately, I am not seeing a lot of good leadership, just a lot of folks who believe that mandating a number is some kind of magic talisman.

Let's come back and talk about this in three years and see how those companies resorting to across the board cuts have faired.

Posted by Mike Neiss at January 23, 2009 8:13 AM

Hi Mike-- I like your comment. Are you perhaps suggesting that some companies are the equivalent of a really large lemonade stand run by 5th graders? I could agree with that!

Posted by Amanda Cullen at January 23, 2009 11:12 AM

In my experience many announcements like this are as much about the drive behind the message as much as the message.

I have seen enough "please cut back" messages fail because everyone thinks their budget is special and excempt that you sometimes need a blanket statement for it to be taken seriously (and fast) it shouldn't be that way but it is

Posted by PaulH at January 23, 2009 1:34 PM

Credit goes to my dad, Shelby Yastrow, for the five inches of money metaphor. Isn't that awesome?

Posted by Steve Yastrow at January 25, 2009 9:40 PM

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Sometimes gathering information is itself expensive. Boss says to underling A: "How long will it take to find out where we need to make cuts?" and to underling B: "How long until we run out of money?" Then boss compares those two times.

And also there is the cost of people taking umbrage at perceived unfairness. Lay off 20% in R&D but only 10% in HR, and some of the remaining R&D folks may get depressed and demoralized or maybe even leave, just because of the difference ("Looks like this company has forgotten how important R&D is!"), which is irrational but it's still a problem. So there is value in appearing to be fair. In general: it is rational to behave "irrationally" in the face of the irrationality of others.

The optimum might be to announce across-the-board cuts, and quietly find some secret way of skewing them to the places they are most needed. Or (radical idea) be honest about the reasons for the cuts so that worst-hit departments know that you haven't deprioritized what they do.

Posted by Daniel Earwicker at January 26, 2009 9:01 AM

This post is just sheer class. I have just sent an e-mail round alluding to this post. I wrote:

"This is probably one of the most intelligent things I have read since giving serious thought to the 5% savings mantra we have been fed in local government recently. I have never been able to put into words what I felt – but this sums it up perfectly"

I refer to the annual and ongoing madness in UK local government who insist on 5% savings in each department etc etc I could go on. But the point of me writing here is to say well done Mr Yastrow for the post; there is soooooooo much truth in it.

Posted by Adrian at January 27, 2009 7:29 AM