How to cut costs in a recession – with help from employees

Abstract

Purpose

The economic downturn requires prudent cost reductions, yet only 10 percent of companies sustain cost reductions after three years. Some of the most successful cost cutters have learned to engage their workforce to embrace both the rational and emotional arguments for taking action and to focus on what the company is and will become. This paper aims to investigate this issue.

Design/methodology/approach

The task of securing employee commitment to cost reductions is not easy, and requires paying close attention to six principles which this paper introduces. This is referred to as the motivating cost discipline (MCD) approach.

Findings

In the example application of the MCD approach, costs were cut by 30 percent with employee satisfaction and price lifted 20 percent.

Research limitations/implications

The six principles offered are collected from observing best practice in the field.

Practical implications

This paper shows that beyond the mandate to an immediately lower cost structure, it is also possible to motivate people in positive ways that produce emotional as well as rational commitment.

Originality/value

Contrary to conventional wisdom, it is possible to get more costs out sooner and realize benefits that are more lasting; the secret is fully engaging employees in the cost cutting process, which this paper helps to do.

Citation

Katzenbach, J. and Bromfield, P. (2009), "How to cut costs in a recession – with help from employees", Strategy & Leadership, Vol. 37 No. 3, pp. 9-16. https://doi.org/10.1108/10878570910954592