The Surprising Connection Between Cost-Cutting and Improved Business Performance

A few weeks back, I wrote about how many organizations are experiencing a paradigm shift that’s changed their focus from growth to sustainability and profitability. After years of throwing money at every problem and opportunity, leaders are suddenly forced to take a step back and consider objectively what is working and not working on their teams and in their organizations.

This means evaluating people, projects, and products that are either not achieving the necessary outcomes, are depleting critical resources, or are causing the organization to lose focus. And, in many cases, the decisions have significant effects on people in the organization.

As hard as these choices can be, the reality is that ignoring something that is not working almost always just prolongs the inevitable and makes the end result more painful. It’s not what you do, it’s how you do it. We always have the option to be kind and supportive when making important decisions that impact others.

Over the past few months, I have talked to many leaders who made those difficult decisions to cut back, often for the first time. Consistently, I’ve heard from these leaders that, to their surprise, performance has improved beyond expectations after these tough choices. At face value, this seems somewhat counterintuitive. For example, one would never expect removing hundreds of employee hours, or significant resources, to produce a better outcome. Likewise, it seems illogical that a team would be happier when they have fewer resources to do the work.

And yet, these counterintuitive outcomes happen often. There are a few key reasons that may explain this phenomenon.

Culture & Performance: Some employees have a toxic effect on a company’s culture, regardless of their job performance, especially if they are leading teams. Similarly, for each employee who has been visibly struggling or underperforming in their job for a while, there has likely been a ripple effect or relaxing of standards for others. Both of these scenarios almost never fix themselves, and proactively addressing them often creates a classic case of addition by subtraction.

Busy & Productive: There is a fundamental difference between being busy and being productive. And few things harm an organization more than cases where people are very busy working on a product or service that is not gaining market traction, is losing money, or is draining resources from other parts of the organization. This is where being objective is critical; performance improves noticeably when resources and people are redirected to priorities that deliver positive outcomes for the company.

Cost of Complexity: Over the years, I have seen our organization, and so many others, make the case for adding additional resources with the promise of more scale and capacity. However, all too often, those promised outcomes never materialize, despite the added costs. The reason is that adding complexity has a hidden cost; as we add more people, processes, and systems, it often requires more people and systems to get the same things done. The reality is that sometimes a five-person team can get something done better and more efficiently than a 10-person team. I recently saw this article about hugely impactful companies with small teams that demonstrates how less can be more.

The reality is that our current environment is forcing organizations to make hard decisions they probably should have made earlier. Great leadership means thinking about the challenges above before they become too hard to fix. A strong leader should regularly and proactively address at least the bottom 10 percent of customers, initiatives and employees on a performance basis.

Many employees are understandably nervous in this environment of cost cutting and efficiency. I recently had a discussion with Liz Wiseman on a soon-to-be-released Elevate Podcast episode where she shared some findings from the research from her book Impact Players, where she researched the shared qualities of the most valuable employees. Here are some crucial highlights:

• While others do their job, Impact Players figure out how to support the most important priorities.
• While others wait for direction, Impact Players step up and lead.
• While others escalate problems, Impact Players move things across the finish line.
• While others attempt to minimize change, Impact Players learn and adapt to change.

 The concept of less is more is not new, but it has become a renewed focus for leaders and organizations today. How can you make sure you are being a productive impact player, and not just busy?

Quote of the Week: “Don't confuse activity with achievement.” – John Wooden

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The above article is a Friday Forward, my short weekly leadership note read by 200,000+ leaders in over sixty countries each Friday morning.

Robert Glazer is the Founder and Chairman of the Board at Acceleration Partners, an award-winning partner marketing agency with over twenty-five best place to work awards. He is also a #1 Wall Street Journal bestselling author and keynote speaker. Full bio and speaking inquires at www.robertglazer.com