Recession Proof Your Business
If you are in management you will find many starting points here to a cost cutting program that will certainly save your company tons of money.
Getting employees to agree to lower salaries is critical for some companies.
With the American car market careering into a skid in late 1989, Chrysler’s chairman, Mr. Lee Iacocca, came up with a novel scheme for performance-related pay cuts. The company’s 2,000 top executives were invited to wager part of their salaries on the success of a cost-cutting program designed to save $1 billion.
Executives could put either 5 or 10 per cent of their salaries into an escrow account from October 1989. If, by the end of 1990, the billion dollars was saved, the executives would double their money. They would simply get their money back for saving between 75 and 99 per cent of the target; half their money back for 50 to 75 per cent; but zilch if they saved less than $500 million.
Chrysler considered asking all salaried employees to take a pay cut, but Mr. Iacocca reckoned that the cost-cutting program would be more effective if executives alone risked part of their salaries on its success.
Hidden Cost of Pay Cuts
During downturns, managers are often tempted to slash wages and jobs without explaining to employees the necessity of such a move. Cutting wages is likely to lead to higher pilferage and theft costs, however, as employees who feel underpaid attempt to “right a wrong”, according to Professor Jerald Greenberg of Ohio State University, who recently studied three manufacturing plants where wages were reduced by 15 per cent.
The key to limiting theft and pilferage is to be honest with employees and to keep them fully informed of the crisis in the company’s finances, according to Professor Greenberg. Otherwise, if they don’t understand, they will feel cheated.
Less Expensive Hiring
There is a lot more to hiring employees than finding the right person for the job. More companies are turning away from full- time workers and towards part-time and temporary ones to reduce costs associated with fringe benefits and to increase flexibility, according to management consultants Cresap, McCormick and Paget in New York.
Health and life insurance, profit-sharing, vacation time, company vehicle, employee pensions, training costs, etc., add 30 to 40 per cent in tax-free income above and beyond the salary being paid to employees, according to Robert Levering, author of One Hundred Best Companies to Work for in America.
Other expenses avoided are the high costs associated with terminating permanent employees, and the growing legal and social concerns regarding the right of employees to job security.
Hiring Females
Men are less productive but are still paid more than women. You could therefore increase productivity automatically by hiring women.
According to a time-use study by the University of Michigan’s Institute for Social Research, the average woman earns two dollars-an-hour less than the average man, yet she works longer and harder than the average man.
The study indicated that the average employed man uses 52 minutes or 11 per cent of his working day for scheduled coffee breaks, unscheduled relaxing and extra lunch time. By contrast, the average woman spends just 35 minutes or 8 per cent of the day on such activities.
And according to the study’s work effort scale, women put in an effort equal to 112 per cent of that of men. This increases to 115 per cent when education and total yearly work hours are taken into account.
Hiring Students
Obtain quality services for small pay by contacting the student service department of your local schools.
If there is a junior college, high school, or trade school in your area, you are likely to find a student to perform just about any service you will ever need. Services the students can provide usually include auto body work, printing, typing, typesetting, copy writing, illustrating, art work, paste up, photography, welding, carpentry, cleaning and maintenance.
Students have generally never practiced their skills for pay, and most would jump at the chance to gain experience, especially if they are paid. They will probably work under the watchful eye of their teachers, who above all demand quality work. If you use the services of these students, you will also be performing a valuable service to the community.
Contact the schools in your area and ask for student services. They will advertise within the school for the manpower you need.
Making Employees Quit
If employees are causing problems, there are surefire ways to alienate them or maybe even drive them away permanently, and avoid the legal and union problems that often occur following firings.
Management consultant Daralee Schulman noted five steps that are sure to work:
Delegate work at the last minute, say it’s due tomorrow, then let it sit on your desk for several days.
Give only negative feedback with no suggestions for improving the product.
Play favorites and assign projects according to your personal feelings.
Block transfers to departments in which employees would learn new skills and earn more money. Use the guise that your department couldn’t do without them.
Send memos every three days that contradict previous memos.
Counting on Employees
You can count on the fact that, even ahead of your banker, your employees know when you’re encountering financial problems. Usually, the obvious signals are constant calls from suppliers for payment, an inability to source certain supplies due to credit restrictions being imposed upon you, and cutbacks and changes in operating procedures.
Other articles in this series of cost cutting ideas:
Money Saving Suggestion for Business
Don’t Get Caught Cheating on Taxes: A Cautionary Tax-Evasion Reminder
