How to Cut Costs But Keep Customer Service

Last Updated Mar 4, 2010 5:47 AM EST

For any major change, engaging front-line staff is important, but for cost saving it's absolutely essential. All meaningful cost savings create change -- and changing behaviour can be a painful process.

Driving through large-scale cost savings without employee engagement is not only self-defeating, but can do significant damage to the business and the brand.

People who serve customers must be able to manage the implications. I couldn't ask for a better illustration than the one I got on a mid-morning train to London recently. We had not long left Nottingham station, when I heard an announcement:

"Ladies and gentlemen, I apologise for the lack of restaurant facilities on the train today, this is due to East Midlands Trains' new staffing policy".

A similar message came over the speaker a number more times as we passed more stations. Each time, the silent finger of blame was pointed at the corporation.

So when you're planning your cost reductions, make sure the people who represent you to your customers are all aboard. Here are five fundamental requirements for a successful cost reduction programme:

  1. Light the burning platform-- publicly
    In order to save IBM from collapse in the 1990s, Lou Gerstner had to take out $8.9bn of costs. In his words, "The sine qua non of any successful corporate transformation is public acknowledgement of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change."
  2. Show the way-- compellingly
    The leadership must explain simply, and with a single voice, the scale and severity of the crisis, and what needs to be done to resolve it. This is a logical series of deliverables, and an outcome that employees understand, buy into and can action.
  3. Take the pain-- quickly
    Where there are difficult decisions to be made, they need to be taken quickly and clearly. Fast is better than perfect. When it comes to structures, make sure everyone is clear about who's accountable for what. The alternative will be turf wars and politics. When it comes to exiting businesses, get a trusted external perspective and listen to the facts. Every strategic transformation will have some flawed decisions, and almost always they are due to emotional attachment.
  4. Stick to your guns-- unflinchingly
    Essential for strategy, fundamental for values. The values and behaviour explained before and demonstrated throughout a change have a defining impact what kind of culture you'll be left with afterwards.
  5. Communicate-- incessantly
    This commitment starts at the very top and has to be sustained. It may be continual repetition of the key messages, tangible changes that cement belief, spotlighting specific achievements or the creation of myths and legends. Whatever the style, the content must constantly reach out and touch every employee. The minute the communication lets up, the focus will drop, progress will falter and the savings will stop coming.