7 Ways to Cut Costs without Firing Your Employees
The truth is that plenty of companies have found other ways to cut costs, often while improving their employees productivity at the same time.
Many of the cost-cutting measures readers suggested to me for this story focused on things like giving employees extra unpaid vacation days, cutting matching 401(k) contributions and increasing health insurance deductibles. All of these steps are valid in tough times, but for this article I wanted to focus on things that arent quite so bittersweet.
Another favorite, replacing travel with Web conferencing, seems wrong to me. This is purely anecdotal, but my experience has been that you cant replace face-to-face meetings with other forms of conferencing. Sure, the content of the communications may be the similar, but the relationship-building value isnt nearly as strong as meeting someone in person.
What I sought for this article were cost-cutting solutions that wouldnt make employees grit their teeth and would actually be smart moves in any economy, not just a recession.
So here are seven ways companies are cutting costs without firing their employees:
1. Focus on your customers your existing customers. Have you ever felt like the companies you patronize dont really value your business? This is a complaint that carriers, cable companies and ISPs field every day. Customers turn on the TV and see lavish offers targeted at new customers. Oh, youre an existing customer? Well, lets see if we can get you a free set of steak knives.
Maybe this is why customer loyalty is so often considered a thing of the past. Back in the early 1990s, Frederick F. Reichheld found that acquiring new customers costs six to seven times more than retaining existing ones. Those numbers have been disputed when correcting for particular industries or products, but the cost of acquiring a new customer is consistently estimated to be anywhere from three to ten times greater than that of retaining one.
Despite those numbers, researchers have found that the typical company dedicates as much as 80 percent of its marketing budgets to acquiring new customers. In many organizations, sales personnel are rewarded more for how much new business they bring in than they are for keeping existing customers happy.
Meanwhile, a widely cited Marketing Metrics report, How to Win Back Lost Customers, found that the average company has only a 5 percent to 20 percent chance of selling to a new customer, versus a 60 percent to 70 percent probability of selling again to existing customers and a 20 percent to 40 percent probability of successfully selling to lapsed customers.
Its obvious that this new-customer obsession doesnt just risk alienating existing customers, but it also represents a significant missed opportunity.
2. Shift your focus from customer retention to loyalty. Most companies have a customer retention program. The trouble is that these programs only kick in when customers have made up their mind to leave. Companies need to do a better job of owning the customer experience better, said Anandan Jayaraman (AJ), chief product and marketing officer for Connectiva Systems.
Connectiva Systems, a provider of revenue and risk management solutions, counsels its customers to be proactive about customer retention. Most companies have significant amounts of data about their customers, but few actually use that data to better engage customers, said Jayaraman.
For instance, carriers usually get warning signs when their customers are unhappy. Dissatisfied customers will visit the website to look at lower-cost plans. Maybe theyll phone the call center to dispute a bill or complain about dead zones. In the process, these customers are providing behavioral data points that dont mean much in isolation, but, in-total, scream unhappy customer.
When companies realize they have an unhappy customer on their hands, they should be proactive and not wait for the customer to take the first steps towards canceling a plan before acting.
Jayaraman likes to define the difference between retention and loyalty as retention reduces churn, which is important but loyalty means that customers are more likely to turn to you for additional products and services. In order to gain loyalty, though, you must prove your value beyond the basics.
Ask yourself, does it make sense to engage your customers only when they are dissatisfied? Wouldnt it be better to help them meet their needs along the way? Jayaraman suggests building proactive retention and loyalty programs. He advocates using the information you already possess about your customers and their preferences and behaviors to understand the customer experience from their point of view.
With this knowledge in hand, organizations can then find ways to help their customers break through roadblocks and bottlenecks that prevent them from doing the things theyd like to do.
For example, if a feature phone user accesses the Internet frequently and racks up high data charges, it would be in both the carriers and the customers best interest to get that person on a different device and plan. The customer will end up saving money, the carrier will have a guaranteed customer for a longer period of time and the proactive nature of the engagement will build loyalty.
This sort of proactive retention and loyalty building isnt confined to telcos. The same sorts of practices are equally effective for banks, insurance agencies, entertainment providers and more.
3. Leverage what you already have. Robert Copenhaver, vice president, Finance at Turner Broadcasting, found that calculating employee bonuses was becoming an unwieldy, conflict-generating task.
Bonuses seem simple. Employees show what they have achieved that year (or quarter) and relate their achievements to corporate goals. Seems straightforward, right? In most companies, its anything but.
We have operational groups all over the world, and coordinating everyone in a coherent bonus program is trying, to say the least, Copenhaver said. Copenhaver would have to deal with dueling spreadsheets, indecipherable faxes, questionable claims that had little documentation to back them up and mounds of information that didnt match up.
To fix this mess, Copenhaver began looking at some of the business software Turner Broadcasting had already deployed. The math isnt that difficult, and we have many business tools at our disposal. I knew we should have something that we could use for bonuses, he said.
The company had previously deployed business intelligence software from Arcplan to improve financial reporting. With a few tweaks, the software was able to tackle the bonus problem, as well. The time we had been spending on this every year was incredible, Copenhaver said. It leaked into months. By leveraging an existing tool, Copenhaver was able to collapse those months into a week or two tops.
Its a centralized solution, now. There is no longer endless debating over the numbers because there is one centralized data set, one set of numbers, he said.
Beyond data consistency, Copenhaver has also been able to use the system to forecast expected performances, update exchange rates for overseas employees and remove conflict from the bonus calculation process because people now know whats driving the numbers.
4. Continue to mobilize. The research about the benefits of going mobile is all over the map, but the two consistent facts are that mobility boosts employee productivity and delivers solid ROI. A Forrester study found that organizations using BlackBerries and the BlackBerry Enterprise Server benefited from improved productivity, better workflows and significantly better regulatory compliance. ROI ranged from 560 percent to a whopping 3,000 percent.
Not only are employees more productive, but the new wave of thin-client devices will also reduce hardware costs.
The iPad and other tablets are poised to revolutionize computing needs for businesses. For example, instead of a laptop or desktop, many employers may give their field sales or service teams an iPad or tablet that connects to a database at the central office. Employers benefit from lower IT hardware costs. Employees benefit from a true thin-client that is void of useless applications and peripherals, said Rushang Shah, director of Marketing at CompanionLink Software.
Shahs last point is critical, but easy to miss: For every study touting mobile productivity gains, theres another bemoaning lost productivity due to employees playing games or obsessively updating Facebook. While smartphone users will never tolerate limited devices void of useless applications", those toting around thin clients most likely will.
Thin-clients are cheaper, easier to manage and easier for mobile employees to lug around. Moreover, unlike the typical smartphone, which is employee owned, thin-clients are purchases and managed by the organization, meaning the organization can dictate what is on the device and what is not.
In a down economy, though, most organizations dont have the budget to mobilize any further than they already have. A more cost-effective strategy is to allow employees to have limited, controlled access to certain apps from their own devices. According to a recent Aberdeen study, 20 percent of companies are finding ways to maintain or increase mobility levels -- even with reduced budgets.
Keys to providing access to employee-owned devices include device-side encryption, outsourcing some support functions and the adoption of mobile device management (MDM) tools to enforce policies and ensure compliance.
5. Find ways to stop paying for things you dont use. While were on the issue of mobility, have you ever tried to work your way through your cell phone bill? The typical bill is several pages long with all sorts of poorly defined charges and taxes -- and thats just for a consumer bill. Corporate bills are vastly more complex and indecipherable, and due to the opaque nature of these bills, many organizations end up paying far more than they should.
As a result, telecom expense management (TEM) solutions have emerged to provide more insight into telecom invoices and to help organizations manage their spending. Berylle Reynolds, CEO of OneCall Manage argues that managing the invoice is only the tip of the iceberg.
Unlike other vendors you do business with, wireless carriers expect you to predict what your usage will be in coming months, Reynolds said. If you forecast too much, you end up paying for minutes you dont use. If you predict too little, you get stuck with expensive overage charges.
What OneCall Manage and other providers attempt to do is turn invoice information into actionable data points that companies can use to influence employee behavior. For instance, traveling employees may incur huge roaming costs simply because they dont know cheaper alternatives are available. Software like that from OneCall can either shut off roaming or send a text to that person, informing him or her to either get a pre-paid SIM card or use WiFi-based alternatives like Skype.
One feature that tends to be overused is 411 services, Reynolds said. You dont want to punish employees for using these services. When theyre busy and on the road, its a convenient way to get information they need.
However, end users never see the invoices. They dont realize how much these costs can add up. Reynolds cited examples of companies paying thousands of dollars for directory services alone. Providing end users with cheaper, or free, alternatives gives companies a way to cut costs without negatively impacting productivity.
6. Continue to automate time-consuming error-prone tasks. IT has benefited greatly from automation, automating all sorts of time consuming mind numbing tasks, including everything from configuration management to deploying patches. Look around your organization and try to pinpoint cumbersome tasks that distract employees from more productive work. When you find those tasks, see if solutions exist to automate them.
For example, look at the documents circulating through your organization. A representative of CLM Matrix emailed me to highlight the risk organizations run into when they let their paperwork get the better of them.
Because of the complexity of contracts and the need to comply with regulations such as Sarbanes-Oxley, businesses are taking a hard look at how they manage their contracts. For many companies, document assembly and tracking remains largely a manual, paper-based, ad hoc process. Internal communication is dependent on email and might not meet all compliance regulations. Data from contracts is entered into multiple systems, or, even worse, contracts may simply be dropped into a file drawer leading to error-prone administrative work.
As with so many other manual processes, technology is promising to standardize and automate this process. Contract lifecycle management solutions can save companies money, reduce errors and boost compliance. Moreover, they free up employees to do more productive work.
Similarly, many companies must track and log telephone calls. Customer service centers, lawyers, accountants and sales personnel often must keep track of their calls. For health care organizations, effectively tracking calls is even more important. To comply with HIPPA, health care organizations must follow strict procedures for protecting confidential patient information.
At the same time, health care providers are busily cutting costs themselves, which has led many to provide various types of advice over the phone. This means that record keeping often consists of a few scrawls on post-it notes or a couple of hastily typed notes in an electronic record.
Not only is this process inefficient, but it may also fail to live up to the standards set by HIPPA. Here again automation is a boon to overworked employees. Automated call recording and accounting solutions, such as those from Trysis, automatically create searchable archives of recorded calls.
Obviously, solutions such as this help with compliance, but Trysis has found that many organizations also deploy call accounting and recording solutions to help boost billable hours. Clearly, an office manager in a busy doctors office will be better off doing something other than trying to makes sense of scribbled notes relating to advice given over the phone.
Similarly, call centers use these solutions to train employees. Sales managers can use them, without delving into the content of calls, to search for patterns to see how sales volumes and call volumes relate. And organizations of all types can deploy solutions like the one from Trysis for liability protection and to resolve disputes.
7. Be willing to spend money to save money. One thing that is clear from the first six items on this list is that organizations often have to spend money to save money. Adopting a new and risk management solution, deploying business intelligence software or bringing in call accounting solutions may look expensive at first glance.
You may get pushback from other parts of the organization when you advocate spending on yet another new technology solution. However, when these solutions address real pain points and cost centers, the savings can be dramatic.
A word of well-known caution, however: many of the solutions pitched to me for this story promised sky-high ROI, but the devil is in the details. Not all vendors are able to back their claims up with anything other than anecdotal evidence.
If a vendor is asking you to spend money to save money, be sure they can point you to someone who has already done just that.
Jeff Vance - Jeff Vance is a freelance writer and the founder of Sandstorm Media, a writing and marketing services firm focused on emerging technology trends. If you have ideas for future stories, contact him at firstname.lastname@example.org or visit www.sandstormmedia.net.