Sunday, August 28, 2011

Why should we Cut Cost during business down turn!?

Since 15 Sept 2008, the World economy will become so fragile and volatile, very hard to be predicted as it was used to be. Semiconductor cycle has been shortened from 10 years to 2-4 years drastically. However, one should grow together when the market rises and stay calm and sharpen our eye when markets started to fall. However only those who stay fits can run fast and make wise decision to stay healthy. Predictions base on rumor, preliminary non-fact base report which is not able to predict an accurate forecast, drawn conclusion for an early global recession would create chaos, confusions and psychotically infection of being “Bad in Shape” and removing all kind of possibility market will shoot up sharply due to many factors.
Worse case is those who get panic first before everything has come to surface to a real economy crisis or never would become a crisis. Worse case scenario goes to those who had been experienced bad economic climate in 1987, 1991, 1997, 2001. 2003, 2008. Who had told himself learnt to be smart and always bearing words in month as” learn to be slim and get yourself fit, get ready for the coming recession. So series of cost reduction programme started too as reaction in anticipation of the impending economic slump.
Wrong Action during business down turn
Cut investment
Cut cost for meal, entertainment and mileage,
Change cheaper airlines and Hotel
Hiring freeze
Leaving seats left department employees empty.
Share hotel rooms
Cut Bonus and Salary
Lay off
I believe all sales contribution is from the front line sales and they are so fragile in handling the pay cut, lay off, once this action has been implemented, there is no way to push for more sales when morale is low. See how hungry soldier fight in the war! Mostly they will be killed! We are not saint. There is no way upgrade the airline and hotel after a down grade. They feel being abandoned by the company. There is no way to push for more sales if the Product itself is lousy. If the product is know uncompetitive, why not go for product improvement instead to push for more sales, more lousy products in field means more un-defused-bombs installed at your Customer sites… wait for a BOMM that kill your customer and you!
I believe one thing: be proactive, treat your staff as important as your left and right hand, treat them with respect …the above actions will have serious bad effect hat everyone knows but every top management usually ignore, as they do go for short terms result which I agree is excellent in short term return result. But the long term harm is Serious!
A wiser action would be during business down turn
Hiring good people
Improve product quality determinedly
Re-engineering for better efficiency
Active Expansion by A & M (lower cost)
Incentive for sales by promotion of morale either by salary adjustment and or increase of bonus
Work with Difficult customer at this time as to build up better relationship, or to repair bad relation when you could not deliver when business was too good!
Work with customer as partner to co-develop mew product
Promotion of high caliber people to lead up the team for more sales
Train the sales team in product sales, Organize more seminar with customer for promotion.
Company earn money by investment, money can not be earned by saving! Wrong concept!
Cost Control, not cost cut, Cost control is a perpetual process, not in bad business time.
HK Snob

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