All of our clients are undertaking some sort of cost-cutting. With increasing uncertainty, it seems most companies are adopting a “do more with less” mentality. Leaders are re-evaluating their priorities, budgets, and infrastructure, making difficult decisions about where to cut, where to pause, and what to prioritize. In fact, a recent survey by flexible-workspace provider IWG revealed that 97 percent of CFOs are cutting costs by more than 10 percent per year.
While these measures are often necessary and prudent, they leave operational leaders to manage the consequences. Two critical risks to mitigate in this environment are an excessive focus on the short-term, and the growing concern of employee burnout. Both risks have a direct impact on productivity, which is crucial to maintain during challenging times.
An overemphasis on short-term decisions can inadvertently empower your actively disengaged employees. Gallup’s engagement research indicates that most U.S. companies have two actively disengaged employees for every ten. This group can be highly influential, often using short-term decisions to challenge leadership’s credibility and recruit others into their mindset of disillusionment.
On the other hand, employee burnout poses a significant risk, particularly among your most valuable talent. These are the employees who are fully committed, consistently going above and beyond. Gallup’s data suggests that three out of every ten employees in U.S. companies fall into this category. While they may initially pick up the slack, this level of effort is not sustainable, and the risk of losing them increases over time.
So, how can you foster resilience and commitment in a “Do More with Less” work environment?
During a recent webinar, The Productivity Paradox: Why Your Efforts Are Not Paying Off, we highlighted a case study of one of our clients facing severe financial distress. The company required significant restructuring, including closing factories, centralizing processes, and reducing headcount. A new CEO was brought in to lead the turnaround, and he quickly realized that the workforce was struggling. While the Board prioritized cost-cutting, the CEO disagreed. He believed that sustainable growth was only possible by bringing employees along on the journey. Without this, they might achieve short-term gains but risk long-term performance.
In just one year, the CEO nearly doubled EBITDA performance and completely transformed the work environment. Using our workforce diagnostic tool, we found that employees initially described the company’s culture with words like “disorganized” and “burnout.” A year later, these words shifted to “transparent” and “innovative.” The smaller, aligned workforce continued to drive improvements in EBITDA performance, and the CEO remains confident that this trajectory will persist despite broader economic challenges.
As you navigate the coming months, consider the following tips to enhance employee productivity while cutting costs and restructuring your organization.
First, your leadership narrative matters. Context about where the company has been, where it stands today, and where it is heading allows leaders to be transparent about the current situation as just one moment in the company’s ongoing story. A strong narrative also helps leaders articulate the company’s direction and why employees should believe in the future. Just as a coach motivates a team at halftime, leaders must define short-term actions while instilling the belief that winning is possible.
Second, be specific, and remember that metrics matter. Many companies overcomplicate things, especially in challenging times. Simplify and clarify what matters most, and use metrics to help employees connect with these priorities and understand their role in supporting the organization.
Finally, empower your employees. In an environment focused on cost-cutting, it’s easy for employees to feel powerless. Rather than letting them feel helpless, create opportunities for them to share ideas and suggest new ways of working. Listening sessions can be invaluable, especially if your company is focused on inefficiencies. Often, the best ideas come from those who do the work and interact with customers daily.
If your company is focused on cutting costs to compete and survive, it’s crucial to balance this with maintaining a healthy work environment. Doing so is the key to achieving both your short-term and long-term goals.
Check out our website‘s homepage to find our Financial Impact Calculator to determine how much productivity you’re leaving on the table, and our Velocity Matrix which helps you define your current state and key area of needed focus. As always, reach out to us to learn more about our approach and to see if we are a fit to support your success.
What We’re Reading:
As parents of college-aged daughters, we are reading The Algebra of Wealth by Scott Galloway. Galloway, an NYU professor and serial entrepreneur, shares his personal approach to achieving financial freedom. It focuses on key principles like focus, Stoicism, time, and diversification. By following this formula, you can reduce economic anxiety through a mix of well-paid work, diversified investments, and smart financial habits.
We are also reading HBR’s Build a Corporate Culture That Works. Building a strong corporate culture is essential for success, but many companies struggle to make their values truly impactful. Generic guidelines often fail to guide tough decisions. To bring your culture to life, focus on real-world dilemmas your employees face. Clearly define the preferred course of action in these situations, ensuring your culture becomes a practical guide for your team.
To create a culture that works, follow these steps: ground your culture in common dilemmas, test your values, communicate them clearly, hire people who fit, let culture drive strategy, and know when to reassess your values.