The True Cost of Cost Cutting

Amid current market conditions, organizations across all industries and sizes are making conscious efforts to assess their spend. In doing so, we see deliberate initiatives focused on redesigning organizational structures, optimizing technology stacks and modifying workplace policies (in-office and remote flexibility). 

Here in ActivTrak’s Productivity Lab, we guide our customers to measure the impact of their efforts. When they don’t, organizations may shed costs in one area and incur new ones simultaneously. All too often, leaders redesign organizations and reduce their workforce size to save on costs, and in exchange, create burnout and turnover, process breakdowns, productivity declines…the list goes on. Below, I’ve outlined ways to measure the impact of top-of-mind initiatives your Finance, Operations, IT and Human Resources functions may use. 

Impact of layoffs/redesigns

Layoffs and organizational design efforts are fast ways to realize cost savings within a business. That said, these cost savings efforts come with costs as well. Institutional knowledge exits the organization and processes require adjustments and training. Perhaps most drastically, culture, engagement and productivity may suffer. For this reason, we highly recommend tracking these three ActivTrak metrics when embarking upon a restructure.

1. Productivity trends: Understand how productivity has changed across teams with substantial headcount reduction. 

2. Utilization trends: Understand how overutilization may increase as a result of more people responsible for absorbing the work of others.

3. Focus & collaboration trends: Understand how focus and collaboration has increased or decreased in light of the redesign.

Impact of technology reductions

Scaling back on technology solutions and license costs at the time of renewal is another common tactic for cost reduction. Many leaders opt for “stack cleanup” to remove what goes unused or what is duplicative (think multiple collaboration tools). To ensure that the removal of technology from your environment is not leading to training deficiencies, process inefficiencies and shadow alternatives, we suggest tracking technology adoption.

1. Technology adoption: Understand how technology is adopted due to eliminating solutions within the environment. 

Impact of workplace policy changes

With many companies adopting a hybrid or remote approach, the opportunity to reduce commercial real estate costs presents itself. The shift to remote work can cause disruption, limited visibility, and communication and collaboration challenges. For this reason, we encourage leaders to measure the impact of their workplace policy adjustments. 

1. Productivity: Understand how productivity varies across different working groups and varying work locations.

2. Utilization: Understand how utilization levels are impacted by employees adjusting their habits from commute times to working from home.

3. Location: Understand how productivity changes from in-office and at-home locations.