Cuts that miss the mark

2011

In an uncertain economic climate, many organisations have no choice but to embark on cost-cutting if they are to survive. But too often, these cuts are a knee-jerk reaction to immediate events that focus on the wrong areas, fail to improve performance and halt potentially valuable projects.

According to research by the Netherlands-based HPO Centre, organisations frequently make the wrong choices when making cuts because their senior management are unable to take a long-term view

"I see many organisations panicking and not knowing how to survive the crisis let alone how they can emerge from the crisis stronger," said Manley Hopkinson, the centre's UK director.

"Unfortunately, many decisions are based on the short term. An impression of doing something to improve results is given, but without the right focus and coherence it is unlikely to have the desired effect."

André de Waal, academic director of the HPO Centre, said that the best performing organisations, make cuts while maintaining focus on what's important.

"We see that strong organisations think carefully about the long-term implications before they cut projects," de Waal explained.

"They focus on the organisation's core activity. They part company with people who put in substandard performance. They also pay special attention to their best employees. They do everything possible to hold on to as much knowledge and experience as they can. And perhaps even more importantly, they concentrate on getting the best result for their customers. Their focus is therefore truly placed on the long term."

Based on the HPO Centre's research across 1,400 organisations in 50 countries, de Waal added that there are five success factors that are key to organisations being able to survive now and stay fit for the future.

1. Quality of Management: Management combines integrity and coaching leadership with fast decision-making. They take a resolute approach to 'non-performers', are result-driven, but always focus on the long term.

2. Openness and Action Orientation: These organisations have an open culture and dialogue is encouraged. Knowledge and experience are shared and concerted into action for improved performance. People learn from mistakes.

3. Long term focus: Building up good alliances aimed at the long term with customers, suppliers and partners. New management is supplemented through internal promotions and talent is retained when reorganising.

4. Continuous Improvement and Innovation: The organisation knows its distinguishing characteristics in the market and allows all managers and employees to continuously contribute to renewing its processes, services and products. Cuts are made in processes that do not contribute to remaining a High Performance Organisation. The organisation continuously improves its core competencies, especially in times of crisis.

5. Quality of Staff: Employees are varied, complementary and able to work effectively together. They are flexible and resilient in their focus on achieving the intended result. Management and staff hold continuous dialogue ensuring that everyone knows precisely what is happening during times of difficulty.

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