We should all be as angry as hell at companies who continue to reduce costs the same old way.

April 24th, 2009

Deloitte /Forbes Insights survey shows some results that should concern us all.

Deloitte /Forbes Insights survey shows some results that should concern us all.

I was listening to the radio today and heard that a local supermarket chain would be closing some stores. The number and location of the stores was not mentioned as the news was relatively fresh. The reasoning surmised by the reporter was that this was a response to the current economic condition as a way to reduce losses and shore up earnings.

As a manager, this author has never agreed with this type of response to tough times. It is typically taught MBA management style ands seems like the only response that senior management ever has to reducing costs and improving earnings.

In support of my opinion (and it is just that, My Opinion) a snap shot of the aforementioned survey was published in the Thursday April 23rd USA TODAY MONEY Section. The results are interesting. The research was conducted January 8th through January 30th of this year amongst 326 senior business leaders and human resource executives as to the top workplace changes to reduce costs. The top changes were as follows.

1. Restructuring Jobs 52%
2. Headcount Reduction 39%
3. Bonus Reduction 35%
4. Hiring Part time Employees 31%
5. Promoting Early Retirement 28%

During this earnings season, these five categories will be rolled out regularly to justify losses and answer queries as to what companies plan to do in order to improve earnings over the balance of the year. Excuses, excuses!

It’s interesting to me that reduction in cost of goods or procurement related expenses is not mentioned as a top initiative. It is entirely possible to reduce costs and expenses immediately that will result in earnings improvements of up to 100%. I have posted on this subject a number of times. When cost of goods exceeds 70% and suppliers are looking for new business opportunities it does not take a rocket scientist to figure out where to focus their energy. We will be glad to prove this to any company that wants to retain employees and still improve earnings.

We appreciate and look forward to your comments.

Ron Southard

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