Most businesses want to know how to reduce costs and waste to stay profitable and competitive while aiming valuable resources towards growth. But businesses can be their own worst enemies if cost-reduction strategies affect productivity. In an era of mass layoffs, organizations are realizing it’s harmful to try to do the same amount of work with fewer employees or resources. Work quality and employee well-being suffer and affect the bottom line when organizations cut employees, technology or tools without a clear strategy.
It’s important to approach cost-cutting measures strategically, using informed insights from data and aligning policies with goals, to maintain productivity levels. Explore strategies to save time and money in your organization without impacting employee productivity in this article.
Understanding the importance of cost savings
Saving money through cost reduction provides clear benefits to businesses. Finding ways to minimize expenses allows businesses to allocate resources more effectively, invest in growth opportunities and respond better to market changes. If a business operates more efficiently, it can focus on core competencies and enhance its competitive edge. Beyond improving financial performance, effective cost reduction strategies help foster a culture of continuous improvement in the organization.
Cost-cutting programs also have major implications for productivity. Employee engagement, well-being and morale are all important contributors to productive workforces. When an organization reduces its workforce, employees often face more work, competing priorities and anxiety about the safety of their own jobs. This leads to burnout and disengagement, which tank productivity. Similarly, cutting tools or technology can hinder employee productivity by changing workflows or making work harder to do.
To minimize their impact on productivity, cost savings should be part of a long-term strategy for a business’s growth and profitability, aligned to strategic goals, rather than a short-term solution. When a business understands how cost-cutting measures impact productivity, it can make better decisions for sustainability and success.
Strategies for reducing costs while maintaining productivity
If your organization wishes to maintain or improve employee productivity while reducing costs, it’s best to approach cost-cutting with a surgical knife instead of a sledgehammer. Here are some strategies for reducing costs with an eye toward productivity.
Know your current costs
You can’t identify unnecessary expenses if you don’t know what’s truly necessary. The first step is to conduct a comprehensive audit of all expenses, from operational costs to employee salaries. Make sure you categorize expenses as fixed or variable. Fixed expenses, like rent and salaries, tend to be harder to reduce, while variable costs like supplies and utilities, tend to be more adjustable. Leveraging technology can streamline the audit process by automating data collection and analysis. This gives you a faster, more accurate view of trends and anomalies.
Set benchmarks
After you know what your expenses are, it’s time to benchmark them against your company’s data and industry standards. Comparing your business’s expenses with those of similar organizations makes it easier to spot inefficiencies. Monitoring your expenses over time shows you where costs are increasing so you can look more closely at what’s impacting spending. This is also an excellent opportunity to set realistic goals for cutting costs in your organization.
Leverage existing headcount
Human resources is one area that organizations first look at when hoping to reduce costs. Salaries, benefits, recruiting, hiring and onboarding are large budget line items. Before hiring new workers, organizations should take a look at current workforce utilization to see if underutilized employees could be tapped to balance workloads. This not only reduces your need to increase headcount but also helps high-performing employees level up their skills and get recognition for their contributions.
Similarly, helping current employees manage their time better saves on costs. Once you know how, when and where employees are most productive, you can start finding ways to remove barriers and bottlenecks to efficiency. For example, employees today spend up to 31 hours a month in unproductive meetings, 28% of their time checking and responding to emails and up to 68% of their time on repetitive tasks. Your organization can significantly cut costs while improving productivity by finding ways to reduce unnecessary meetings, streamline workflows and automate repetitive tasks.
Right-size real estate
Rent and mortgage payments are often the highest costs for businesses. Thanks to technological advances, businesses today can cut these costs by introducing remote work environments for employees. Having employees work from home cuts overhead costs like utilities, janitorial costs and rent.
However, simply sending employees to work from home isn’t the best solution for every business. It’s best to use productivity management software like ActivTrak to get a full understanding of where and when employees are most productive. Your organization may find it still needs some office space for hybrid options or workers who function better in the office.
Cut unnecessary technology
It’s common for companies to implement technology solutions to solve organizational problems. Without monitoring and oversight, this can lead to bloated technology stacks that may hinder productivity and cost the company unnecessary money. With the right data, IT leaders can see which apps are redundant, which apps employees use well, which apps are confusing or which apps are bleeding company money through unused licenses or improper use.
When determining what technology to cut or keep, ask yourself:
- Is this tool indispensable to the work employees do?
- Are employees using the technology to its fullest potential?
- Is this technology causing more distraction than help?
- Are there other tools that duplicate the features this tool provides?
- Is this tool up-to-date and compatible with our company’s future plans?
- Could employees use this tool more productively if they had better training?
Foster a cost-conscious culture
Encouraging employees to be active in cost-saving measures can lead to innovative ideas for reducing expenses. When employees feel empowered to contribute to cost reductions, they’re more likely to take ownership of their roles.
At the same time, leaders should establish and communicate clear goals and metrics. This should include both targets for reducing specific expenses and improving productivity metrics. Regularly reviewing these goals also allows your organization to stay focused on cost-saving initiatives and celebrate successes along the way.
Negotiate with suppliers
Although supply chain issues and other economic factors have increased costs for most businesses, there’s often still room to negotiate with suppliers to bring down the costs of products and services. Manufacturing and industrial businesses can look over their contracts to see if suppliers will renegotiate for bulk discounts or as a reward for being a long-term customer. Small businesses can improve cash flow by finding out if suppliers will allow for longer payment terms.
Examples of how companies have reduced business costs without lowering productivity
Businesses of all sizes and industries have found ways to cut costs effectively while maintaining or improving productivity. For example:
Headcount management
Echo Logistics, a leading third-party logistics provider with $4 billion in revenue and more than 2,500 employees wanted to align headcount with actual work needs. Using ActivTrak’s workforce management software, they identified underutilized workers to reallocate tasks from a busy sales team, saving them the resources and budget of finding, hiring and training new workers. Using workforce efficiency insights to improve workforce allocation, Echo Logistics realized over $600,000 in labor savings.
Technology management
Parts ASAP, a parts supplier for large equipment, wanted to cut technology costs and simplify operational aspects of the business. Using ActivTrak, the company identified tools that were redundant but still in use as well as which employees used them. With this data, they transitioned employees from the old software to the updated tool in a smooth, orderly fashion with supportive training. They were able to cut the duplicative technology and save thousands of dollars in licensing costs without impacting productivity.
Reduce business costs and improve productivity with ActivTrak
To cut costs effectively without impacting productivity, you need the right data and actionable insights. ActivTrak’s workforce management solution gives you deep insights into how work gets done so you can make informed decisions on what to cut and where to invest for improved outcomes. Contact our sales team today to create your free account and start transforming your business with data-driven strategies.
