You Can’t Cut Your Way to Greatness
When businesses and organizations reduce their costs, one of two things happens. Either they stop being able to do something useful that they previously could do, or they stop wasting resources that weren’t doing them any good. Of course, it’s more nuanced than that. Most budget cuts probably do at least a smidgeon of both, though I would say that in most cases, it’s clearly more one than the other.
All organizations gradually accumulate “wasted” costs. It’s pretty natural because a decision to buy something or pay for something gets made, based on the facts and reality of the time in which it’s made, but human nature doesn’t thoroughly review past decisions the way it agonizes over new ones. We tend to just move on, and what already exists gets a lot of leeway to just go on existing.
So if you don’t periodically and quite cruelly review the organization for this waste and either eliminate it or put it to good use, the situation eventually gets bad.
This is on my mind because I’ve read recently about several arts organizations and other organizations that are de-emphasizing or cutting things that would appear to me to be useful and productive parts of what they do.
Sure, cut customer service. You’ll save (relatively little compared to your budget) money, but only on your cost line and only right now. In time, your sales and retention will drop and you’ll find those costs returning in the form of things like chargebacks, increased advertising (which you’ll need to make up for lost sales from bad word of mouth) and staff turnover from the stress of having job responsibilities overextended and inappropriately assigned.
Sure, cut performances or trim your season back. You’ll save some money there, but unless what you’re cutting are performances that people don’t like, don’t support and don’t want to pay for, you’re cutting a productive asset. It’s like not spending a dollar that earns you $1.10. You get to “keep” the dollar, but I think you’ve missed the point.
Sure, underpay or cut talent. That can be a big saving, but unless you believe that being better at something doesn’t make any difference to the outcome, I can’t see this working out for you, either. Quick scenario: You have a local favorite restaurant that you go to once a week. You spend $50 every time you go there. That restaurant replaces its good staff with minimally acceptable staff at a lower rate and its quality, organic fresh food with minimally acceptable food. It’s a massive savings for them … probably 10 to 20% of total budget.
Are you still going to go once a week? Once a month? If you go from once a week to once every two weeks, you’re spending 50% less with them, and they’re saving (at best) 20% in costs.
Would you pay $5 to save $2? Because that’s what a restaurant or organization like this has done.
What you should do is invest more in the things that drive results, especially for customers, and cut more of the things that are not delivering results. To do this requires that you look frequently at what you’re spending on and be honest with yourself about what’s really making an impact. This is hard, but very worth it.
Because you can’t cut your way to greatness. You can cut out waste, and that’s good. It can help you get on a more solid financial footing, but it doesn’t make you better.
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