Evan Davis on... cutting costs

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Here’s one of the most unpleasant business tasks you can imagine. Your revenues have declined by, say, a quarter over the course of the year and now you have to cut your costs by a quarter over the course of a year too. What are going to do?

Well it turns out the most useful thing you can have on your side is the trust of your staff. If the staff trust you they will buy into the plan, they will cooperate with you in the plan, perhaps even improve or suggest ways of cutting costs in order to save the company. If the staff don’t trust you they will obstruct the plan, they’ll get in the way of it and indeed, it’ll make it much more expensive and difficult to proceed with the plan than it otherwise would be. So trust turns out to be absolutely crucial.

But here’s the nub of it; in order to have the trust of the staff you have to have had that before the crisis comes along. The staff won’t trust you if you come the day of the crisis and say, “Hey folks, we need to cut a quarter of our headcount.” What they don’t want to do is cooperate with somebody who’s cutting a quarter of the staff simply to get the dividend up for the shareholders. That’s never a way to get employee buy-in to some difficult choices to be made.

So the truth is, if you want to make and handle a company in a crisis, you’d better make sure you had the trust of the staff before the crisis came along.

That’s my view, you can join the debate with the Open University.