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Sprout Business Talk

Sprout Business Talk

Date: 2014-03-07
Times of late have been tough. Revenues aren't rising as quickly as costs in many instances as the recession has forced buyers to put pressure on supplier's to reduce prices. Few companies can sustain losses before they either need to get more investment, borrow money or, in most cases, cut costs.

Staff costs are typically the biggest component of a cost base. Care is needed to ensure that all staff are kept motivated when not giving increases or bonuses. This is often the easy approach as all are treated the same and all jobs are kept. This is counterproductive in my mind as the top and bottom performers are all treated same. It is then usually the top performers that feel the inequity of the blanket approach and lose motivation.

My preference has always been to retrench, as difficult as it is, rather than to cut the pay of everyone equally. The reason I say this is that the remaining team tend to feel insecure when there are pay cuts and you could lose key staff who value job security highly. You only want to go through one round of retrenchments if you can help it or insecurity will set in.