Demystifying Frozen Budgets

Let’s address the elephant in the room. The audio boom of the past few years is going through a shake-up. The prominent players in the game—BBC, Audible, Audioboom and Spotify—have announced job cuts, frozen budgets, and other efficiencies to manage their businesses for their shareholders better. This echoes through the rest of the tech industry. If you haven't already, we will soon hear phrases like "redundancies and downsizing," "maximising value," and "restructuring” in carefully worded speeches, press releases, and emails.

These phrases fill freelancers and business owners alike with dread. We're either on the handle end of the metaphorical axe, having to choose between laying off employees (or "closing positions," to use the cost-cutting jargon), or you're on the blade end, the one being cut (or your budgets or services are). At different points in my career, I’ve been on both. In fact, I have left more organisations through layoffs and restructuring than for any other reason. So, here are some of my observations about cost efficiency measures and how to feel better about them.

In the old days, before political correctness, it was called "trimming the fat." The implication is that the company could operate better if it were leaner and more streamlined. Lean processes and quality management systems have been employed worldwide in various guises to tighten business belts—increasing productivity, maximising quality and reducing waste. Trust me, I was a Six Sigma Black Belt. Finding efficiencies and change management was literally my job.

How did we get here? Remember those 1970s sitcoms when they had the shop steward and inspectors who sat somewhere between the workforce and 'the management'? They kept an eye on things. They checked products and passed everything before it left the factory (and also kept the workers in line). Then came the good old BS5750—the British Standard for quality assurance—or ISO9000 for the international one, which made quality an integral part of the production process—no extra checks other than to verify that everything was working as it should (so no more inspectors). Concurrent engineering, lean systems, kaizen, continuous improvement, six sigma, and design for six sigma were all introduced in the 1990s. It's just like with those washing-up liquid adverts; if the first formula was that good, why do we need the new, improved version?

I’m not knocking these process improvement methods. Ultimately, if the tool is not the problem, it must have to do with the process you use to solve it. Swinging a big axe around your head won’t help you unless, at some point, you strike the right thing in the right way.

I use the analogy of going on a diet to lose weight to help visualise what I mean. Cuts are not a cure. At some point, your business was deemed healthy, or at least healthier than it is now. As the person in charge of making cuts, it is crucial that you truly understand the objectives of what you are trying to do. A 12% budget reduction across all departments is not a clear objective. That’s a target.

In the same way, most of us wouldn’t start on a diet trying to lose 20 kilograms evenly distributed across our bodies. Some areas need more, others need less. This is why ‘salami slicing’ (taking small portions from every area of your business) has a limited effect. Some parts are doing fine and are pretty peachy. Thank you very much. So, before you swing the axe, assess your company holistically. Know what needs more and what needs less. Sometimes, even the slightest cut has very significant consequences. For instance, think about reviewing our own finances; we can easily halve some expenditures (like the satellite TV package), but others we can't (like the mortgage).

Reduction isn’t the only answer. Diets don’t always mean eating less. There are types of food and drink for which you might have to increase your intake. Yes, to grilled chicken, nuts, and eating more meals during the day, as long as it’s not the deep-fried or honey-coated kind and eaten in moderation. It might involve a more significant investment of time to prepare meals rather than cheaper convenience foods, or buying relatively expensive supplements or diet shakes.

The same is true for our businesses. Rather than cutting, the key to increasing productivity or competitiveness may be to invest in a new area or review an existing one. When used as part of a well-thought-out strategy, increasing spending on some of your work could be more lucrative. A little short-term pain might produce better results in the long term than savage cuts. Why not increase the offer of your best-selling line or service? It's already working, so how can you make the most of it? Also, just because something works well today doesn’t mean it will always perform this way. Is there an area of your business that sucks up resources with a relatively low payoff, but you’ve stuck with it because it’s consistent? Perhaps now is the time to free up the people working there and put them on something that gives you a bigger profit margin.

Resources matter. It is always more effective to review the inputs to your process instead of looking at what comes out the other end. I’ll skip the diet analogy on this one for obvious reasons. Analysing the way a department is working might be a better option than cutting the budget. By that, I mean productivity is more than how much they are producing or how much they are spending. The people in those teams will probably thank you for asking them, “What would improve our output and make it more efficient?" One company I worked with had a massive problem with unresolved invoices. They had a large amount of money due to come in, but it never arrived. It didn’t take long to figure out that the system for processing delivery notes had been a casualty of a recent office move. The remittance notes that triggered the invoices being sent were sitting in an in-tray on the old desk, waiting for action because the person whose job it was had left the business in the move, and the new person hadn’t been aware. You can imagine the rest. That was $400,000 worth of outstanding invoices because of a bad process. Oh, and I have more stories like that—like the faulty photocopier that ate up 1.5 people on the headcount every month!

Please cherish the opportunity for improvement rather than worry about it. It makes little sense to do all that work to get a new, lean body and then not take care of it, so it stays that way. Love your new processes and ways of working, even if it means having some difficult conversations in the short term. Remember that whatever you change, invest in, or cut will need to be maintained. So, as you make the change, think about what it will look like in the next six to twelve months. Will it overwhelm your team with additional work they can’t manage, or will there not be enough people to do the new work that comes in? That will take you back to square one: no longer being profitable as a business. It will cost something to sustain your new look, process, team, or business. How will your diet change after you’ve reached your target weight (yes, the analogy is back)? What kind of exercises will you need to do, and how often? How much will it cost? This is the hidden cost we often overlook when we make cuts, but without it, we yo-yo from fat to lean to fatter to leaner-ish. It's a new gym membership, a new smartwatch, and new clothes to fit your slimmer figure. Like us, organisations can become complacent: “I’ve dieted before, so I can do it again." This may be true, but it’s harder to achieve the same results the second time around. You’ll have fewer resources this time and possibly a weaker incentive. Then the entire department has to be outsourced. I’ve been there and seen it happen.

Ultimately, businesses have to be competitive. To do that, they have to keep costs low and make improvements. My recommendation is to do it with others. Many have been through it and survived. Their experience is invaluable, including some of your existing staff. If you have a workforce or even a small team who care about your business, I promise you can make the whole thing a lot simpler and a lot less painful by getting their input. Use an anonymous suggestion box if you’re unsure how to ask (as a manager). Or, as an employee or freelancer potentially affected by cuts, send your boss proposals and options. I once had a freelancer voluntarily step down ahead of budget cuts and then pitched a four-day-a-month consultation on the project they were working on. Smart.

The upside is—yes, there is one—everything goes in cycles: boom and bust and boom again. An audio boom, if you like. Our industry is not being decimated. Our audiences, as well as our businesses, will continue to grow. They need our content. We are recalibrating at the moment. Make sure we keep talking, being transparent, and being as creative with our choices as we are with our content.

Any thoughts about cuts, budget freezes and redundancies? Don’t hesitate to drop me a line on LinkedIn.

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