What Do You Do After You Cut Costs? Two Things!

Posted by Jim Connolly on 3 December, 2009  Email This Post -  Print This Post

After one or two or three rounds of cutting costs, now what do you do?

Cutting costs as a method to achieving profitability rarely works, but this is especially true in the current recession.  The falloff in September 2008 was so precipitous that there was no way for companies to “trim the fat” in order to be profitable.  

Several companies I’ve worked with on organizational restructuring efforts over the past 15 months lost 30%, 40% and 50% of their revenues. In the most extreme case, one company that asked me to help them ended up losing 68% of their revenues.

There is no way to cut enough costs to make a company profitable in these circumstances.  So, what do you do?  The only option is to reinvent the company.  

It’s about taking a leadership team through a 5 month strategic planning process in 5 days.  In essence, it’s about asking “based on these new realities, what are the market opportunities that we are uniquely qualified (compared to our competitors) to take advantage of?” This process is hard to do while the ship is still on fire and sinking.

What’s the secret to successfully navigating these treacherous seas?  It’s two things. Use an effective planning tool that bubbles the best opportunities to the top quickly. And, it’s about understanding how humans behave in high stress situations and still being able to capture their attention and creativity while they are in shock and bailing water.

Sure, it’s easier said then done, so proceed with caution.  But, it’s often the only way to restore an organization to profitability when cost cutting isn’t enough.