With the economic slowdown affecting organisations, many corporates have re-planned their spending policies. Some have even gone the whole hog by laying off, by thousands. We suggest that cost management is an effective tool to control the rising costs.
Robust, progressive and forward looking companies are doing what is the need of the hour – managing cost. Efficient cost management includes spending where it is absolutely necessary, streamlining processes and also cutting flab.
For the HR team in any organisation, cost management is an important target to meet, as it is for the marketing or sales division. It becomes a challenge for them to simultaneously manage employee expectations and costs. There is certainly no doubt about the fact that firms across sectors are taking proactive measures to manage costs better in times of stress. All things that were unlimited will now come under one cap.
This is a good time for HR managers to come up with innovative ways to rationalise cost instead of fooling around with cutting peanuts and not even looking at the corrective methods of cost management. I used the phrase fooling around as I know of companies where in the name of cost cutting, the employees’ tea and coffee were cut, the M.D. bought a new BMW for his son in the times of recession and rest of the employees’ salaries were cut by 15%. How unfair and how pathetic?
Lets find out the way where we can learn to manage the cost in a more appropriate manner.
COST MANAGEMENT IS THE MANTRA!
While cost cutting refers to a situation where companies stop certain internal activities or functions altogether, cost management translates into effective utilisation of the resources available. In other words, it is an effective method to control costs and manage money for the benefit of the company.
When corporate houses decide to cut costs, it entails the sacrifice of business development and growth, as it is most likely to adversely affect the company’s customer service, R&D and technology. On the other hand, cost management ensures that the revenues available to a firm are smartly deployed. It involves short term and long term planning, and controlled decisions that increase value for customers and lower costs of products and services.
In lieu of the grim global business outlook, a lot of firms are consciously implementing cost management measures to enhance productivity. Besides the usual curb on travel, communication etc., firms are managing costs by delaying plans to lease new office spaces, freeze proactive hiring to avoid any potential overheads, etc.
TRAIN TO GAIN!
Some companies are trying to seek out suggestions/ innovative ideas from employees to manage costs and enhance productivity.
There are two cost management strategies that can be extremely effective. The compensation strategy which involves salaries based on fixed and variable factors. This means keeping the salaries at the basic level.
The second is many corporates are encouraging their internal employees to focus on training, and deliver above and beyond the client expectations; increased productivity will result in accelerated career growth for the employees.
No doubt recession was a challenging time. But it was also a chance for companies to connect with their employees and take innovative suggestions to manage costs without compromising on quality of work, and internal office activities. Through such an effort, companies can not only implement relevant programmes to manage costs, but also utilise the platform to connect with their internal teams.
The planning and control of costs is usually inextricably linked with revenue and profit planning. If companies focus on cost management as a part of their regular business practice, the former will not be seen as a measure to tackle crisis situations.
Managing costs in a suitable approach will not only increase the confidence and trust of the employees in the organization but also will work as a retention strategy in the long term. If the organizations are taking care of them in difficult times they will also be there in rough times.