The perils of cost-cutting

It might be the season of goodwill, but times are hard and IT firms are looking to cut costs where they can.

It might be the season of goodwill, but times are hard and IT firms are looking to cut costs where they can.

Recruitment firm Robert Walters says businesses are instituting employment and pay freezes, making staff redundant and awarding lower-than-expected bonuses, if any at all.

The agency warns that if handled badly, downsizing and cost-cutting will backfire on an enterprise, hitting morale, lowering productivity, eroding goodwill and encouraging staff to leave when times pick up again.

Auckland Regional Council CIO Tony Darby says staff will accept unfortunate changes if they are well-informed enough to see they are needed.

“The problem is that a lot of organisations don’t communicate this well at all. In the absence of clear information as to what’s going on, it’s human nature to assume the worst. I remember going through a similar process about 12 years ago where the lack of information regarding a downsizing was so demotivating, I ended up leaving the organisation,” he says.

At the time, Darby says all he wanted to know was what was happening at the firm, where it was going and where he fitted in.

“People need to feel valued and the last thing you want is for staff to feel you [employers] don’t care for them,” he says.

Darby says staff need to know three things when firms make change: does the firm care for me, is it committed to excellence and can it be trusted. And if firms must downsize, they must communicate with those left behind bearing the three above points in mind.

Darby says bonus expectations not being met is a sign of failure of communication.

“If clear and consistent feedback is given then the people concerned should know what to expect. If the organisation is not going well, then the people should know and understand this also. Keeping clear communication lines open to senior management should not be lumped in with flexible hours and training and be classed as the priorities for 2002. Clear communication is the right of the individual and fundamental to good leadership. It is also the key to valuing people,” Darby says.

Cutting costs can be counter-productive if mishandled. Say, for example, a company tightens up criteria for company-paid taxis home after after-hours work-related social functions. If the firm doesn't pay for taxis, staff may look for reasons not to attend, such as the added costs and inconvenience of a late trip home. Thus the organisation could lose contact with its business partners, contacts and suppliers, which eventually could hit its bottom line. Or staff may attend the functions but feel disgruntled if they have to fork out for them themselves.

Robert Walters business development manager Mandy Buck says most workers understand "commercial realities" have to be lived with, but these must be communicated well and, to keep morale high, firms must find other non-fiscal incentives for staff.

Such ways, she says, include being more flexible about staff leave and working hours, focusing on training and mentoring and keeping flexible communication lines open to senior management. These incentives have to become a priority in the coming year to ensure the retention of staff, Buck says.

Other HR specialists, such as Ross Turner of Pinnacle Recruitment and Beverley Main of the Human Resources Institute of New Zealand, told Computerworld they agree with Buck.

In the business world, Hewlett-Packard NZ manager Barry Hastings says HP has practised morale boosters (mentoring, flexible work hours, training, open communications) as part of “the HP way” for many years and would continue to do so.

“These practices are particularly important at the present time,” Hastings says.

Greenwood is Computerworld's human resources reporter. Send email to Darren Greenwood. Send letters for publication to Computerworld Letters.

Join the newsletter!

Error: Please check your email address.

Tags careers

More about Hewlett-Packard AustraliaHPPinnacle

Show Comments
[]