10 Tips for Smart Cost Cutting

By Paul Facella

You can't open a business magazine or click on a biz Website these days without reading about the next company announcing major cuts in an effort to stay alive. Sometimes its cost-cutting measures bring to mind the image of over-pruning a fruit tree. If one cuts too deeply or in the wrong places, the whole organism will go down.

There are smart ways to cut costs. I've been there, as regional vice president of McDonald's largest profit center in the U.S., and I've seen what works and what doesn't.

A few things to keep in mind: Make sure it's a team effort—and that everyone is aware of what's going on. As a leader, present a positive front. And don't make any cuts that would jeopardize the quality, integrity, and mission of your organization of product.

Here are 10 more cost-cutting tips:

  1. Cut leader perks. To maintain employee morale, clearly, perks for managers should be the first to go—including salary reduction and bonus cancellation. It sets the tone, leads by example, and sends the message that "we're all in this together."

  2. Double up on cost items. Examples are rental cars, hotel rooms, and equipment purchases.

  3. Stay put. Cut unnecessary travel whenever possible. Instead use phone, meeting consolidation, conference calls, and video conferencing.

  4. Freeze hiring. Delay hires if possible, especially in administrative services.

  5. Combine jobs. Where plausible, and even if only for a short period of time, give employees incentives to double up with jobs "if they can handle it." Many times you'll find you don't need that extra person, and you'll save on benefits, downtime training, and staff costs.

  6. Seek solutions from staff. Ask people to come up with their own cost-cutting ideas and reward them when they do—by giving a percentage to the contributor or simply a flat reward. I've done this, and it works big time.

  7. Review staff salaries and benefits. Do this carefully, and make sure everyone is "sharing" the cost of health care.

  8. Consolidate. Multiple offices, profit centers, locations, and retail outlets need to be reviewed for their overall profit contributions. In many cases, terminating leases and closing of multiple locations stops the bleeding of expenses. Likewise, in a retail concept, delaying growth of additional units opening can save huge amounts.

  9. Switch from ads to PR. Instead of advertising, which is expensive, try public relations, which costs little, instead. In many businesses, it can actually have a better result at a fraction of the cost.

  10. Don't mess with morale. Never, under any circumstances, cancel an office party, a holiday celebration, or rewards ceremony. It costs nothing to reward employees, lift their morale, and pay attention to them. Have your managers spend floor time with employees. Eat lunch with them. Buy them a cup of coffee. Send them a note of praise. These gestures of thanks and appreciation keep employees loyal during trying times.

Author Bio:

Paul Facella is a 34-year veteran of McDonald's who is now CEO of Inside Management (www.insidemanagement.com). His new book is Everything I Know about Business I Learned at McDonald's (McGraw-Hill, www.mcdonaldsbook.com), named by USA Today as a Top 5 Business Book of 2008.

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