Our Founder Dean Hunter was interviewed by David Reid of Because Brands Matter, around the controversy surrounding cost reduction. Here he provides some helpful advice to reduce costs the right way.
Watch the video here, or read the transcript below.
David Reid (DR):
Hello, my name’s David Reed and today I’m talking to Dean Hunter who’s founder of Hunter Adams HR Consultants. We’re going to be talking about removing the controversy around cost reduction. Now let’s face it, everyone loves it when companies are doing well, annual targets are being met, bonuses are being paid. But in challenging to like these, how do businesses make ends meet? And more importantly, how do business owners and leaders take those difficult decisions that sometimes have to be made? So, Dean, you’re experienced, you’ve worked with a number of companies over the years within HR. How do you see the marketplace at the moment?
Dean Hunter (DH):
So I think there’s a real mixed bag out there. I mean, some are growing, some of our clients are still acquiring other companies. For the most part, I would say that it’s probably the greatest leadership challenge that many have faced ever in their careers. They’re trying to adapt to new ways of working, reduce workload and it really is a leadership challenge.
DR:
How are companies facing these challenges?
DH:
I think there’s a real difference between the large and small companies. I’m going to generalize for a moment, but in the large companies, they’re very much set up for cost reduction. They’ve done it before. You just have to be careful with that, that it starts feeling a bit mechanical and insensitive the way that it’s approached. The small companies, the small owner managed businesses, in those I think we see people just want to protect their staff. They want to protect their company and that can lead to a situation where decisions are deferred, no action taken, communication closes down.
DR:
What are the risks then in delaying decision making?
DH:
Yeah, I mean, I see a spectrum out there. Yeah. There’s a spectrum. At one end of the spectrum it’s a knee jerk. Let’s just go straight to redundancy. At the other end of the spectrum, it’s I’m not going to make a decision at all. We don’t really want either of those scenarios because the ultimate risk is obviously from a cashflow point of view, we know how quickly that can spiral and ultimately it leads to closure of a business. So our messaging would always be to protect as many jobs as possible and in order to do that, you need to make decisions at the right time.
DR:
So what would you say then to a business leader who’s maybe sitting at home and worrying about the future, the financial future of their business?
DH:
The first thing I would personally say to them is I understand. One of our key sectors had went through a recession for four years and that had a massive impact on our company. We diversified and we grew again, but not withstanding the fact that if I let it, it could have broken me personally. I was worried about 70 people’s jobs. The fact that I was ultimately paying their mortgage and felt very personally responsible. So I think I’d advise them to step back, understand that you can’t control it. It’s not your fault. There’s plenty of support out there, whether it’s government schemes. If you have to then move onto cost reduction, the key for me is invite participation, talk to the team, get their involvement.
DR:
Okay. So let’s imagine that cost reductions are implemented and we can kind of imagine the soft targets that one could get rid of quite quickly. But if they haven’t generated enough reduction then what about areas like redundancy? I mean, clearly that’s not a nice thing. Why is it that companies get such a hard time for even contemplating making people redundant?
DH:
I think the criticism is probably higher now than it’s ever been because there are other ways. Now what we need to be really careful here is we don’t want companies abusing government schemes, but equally we don’t want companies being challenged in employment tribunals because it didn’t explore the schemes. So I think the criticism comes from not exploring other options. It comes from not communicating. It comes from not answering people’s questions. It comes from unfairness or lack of fairness in the process.
DH:
If you involve staff in cost reduction, I mean, I’ve seen examples where staff have come forward and said, “Reduce my pay, reduce my benefits.” Often we kind of close them away from everything that’s going on and hope it’s going to just pass us by, but we really need to bring them into the conversation and that’s going to really help to reduce the criticism if you ultimately do end up in a place of redundancy.
DR:
Okay. So let’s say that a business ends up in a situation where redundancy, it’s inevitable. How can the likes of Hunter Adams come in and help advise and help businesses through that process?
DH:
I think that’s a really good question, David, because he one thing you don’t want to do when you’re reducing cost is to spend money. So where’s the value? The value is very different for the employee than it is for the company. So from our perspective, redundancy is the worst thing that we have to do in our jo, working in HR. Same for a line manager.
If we can make sure that the individual is managed fairly sensitively, they walk out the door with dignity and they look back and think actually, do you know what? I’m not happy, but that was managed as well as it could be. Then we’ve done our job. From the company’s perspective, the leader of the business may want us to lead the process because they don’t understand it. Or they might just want some advice or guidance. I mean, UK employment law’s got a lot more complicated than it needs to be so it’s not a simple process. So whether it’s support with communication, consultation meetings, trade unions, or just a sounding board to help them through the process, that’s where we would add our value.
DR:
Okay. An employee’s never going to thank you for being made redundant. So are there ways of reducing a controversy around that whole unsavory topic?
DH:
Yeah, I think I’ve covered some of them already, but to summarize, I would say explore all options. So our recommendation is government schemes, other forms of cost reduction, whether that’s reviewing terms and conditions, working hours, discretionary spend and then redundancy. Communication at the right time, good news and bad news. Ultimately we want no bolts out of the blue and remember it’s about people. So because the law is complex, we’re all so fixated on getting the process right that sometimes we forget that it is about people and that’s where it can come across as a bit cold and insensitive. That’s just going to make the process more emotive than it needs to be.
DR:
That’s a good point. Now you’ve mentioned a couple of times government support. Is that something that you think businesses should be looking really carefully at the moment?
DH:
Yeah. I mean, I’ve covered the fact that you need to get it right for you. You don’t want to use the schemes equally. You don’t want to make people redundant without looking into them. I think the right answer for any business comes from asking some key questions. So the questions that I would be looking at is, is this a short term issue? We don’t know that today because we don’t know where the future lies, but the questions we do know is what is the cash position of the business? What are the order books like? How quickly can we build up the business development pipeline of work?
In some sectors like professional services, that could be tomorrow the work comes in. In other sectors with procurement and tendering processes, that could be six to 12 months before another contract is won. Can you last that long? These are the questions that really would ultimately give you the indication of whether or not it is a government support issue or ultimately a redundancy process.
DR:
Okay. My final question is how many companies get this whole area of cost reduction right?
DH:
As you would imagine, very few. We still see the knee jerk reactions, the panic, which is the end of the spectrum we don’t want. We hear about the people with 10, 15, 20 year service being marched into a meeting room with no notice and being told that they finished today. So unfortunately, whether it’s poor communication, lack of transparency, unfair selection process, no process at all, there’s certainly great room for improvement.
DR:
So summing up, Dean, it’s about exploring all the options. It’s about good communication, it’s about following a process and crucially not leaving things until it’s too late.
DH:
Yeah, I think that’s certainly the key points and just remember that this is about people. It’s not just the process.