Here are some definite cost-cutting ‘no – no’s’
By Ross O. Storey
01 Jul 2009
Some thought-provoking insights, provided from the financial management end of the IT spectrum, at a CFO forum in Singapore last week, made me sit up and pay attention.
The forum on ‘Business Intelligence for Challenging Times’ was jointly organised by the Institute of Certified Public Accountants Singapore (ICPAS) and Microsoft.
The end-user guest speaker was Chow Kam Wing, executive director and chief financial officer of Micro-Mechanics (Holdings), an SGX main-board listed company that designs and manufactures tools and precision parts for the global semiconductor industry. He is also currently a member of the CFO committee of ICPAS.
Chow was recognised as CFO of the year at the 2008 Singapore Corporate Awards and in 2006, Micro-Mechanics was ranked among the 200 best companies (under US$1 billion) by Forbes Asia.
He outlined some interesting economic definitions. He said that a recession was when your neighbour loses their job and a depression was when you lost yours. Bitter-sweet jokes aside, the part of his presentation which interested me most, was his list of things NOT to do in a recession, and they are worth repeating here.
Chow said his principle was that cost-cutting should always be based on continuous improvement because it always involves sacrifice and executives should always examine process. Everyone in the organisation should have a CFO mindset and should live a cost-saving culture.
Marketing – Don’t touch your marketing, continue to reinforce your brand. Go ahead with your advertisements. Not for nothing is there the saying ‘out of sight means out of mind’ and this is especially true for your clients and customers.
Technology – Don’t cut anything about your technology because it is your competitive edge; your future.
Training – Don’t cut anything to do with training. People may say that after receiving training employees leave the company, but if you don’t train them, will they stay? No training could bring worse results.
Integrity, risk management, internal control – Don’t touch anything to do with these key areas because during a financial crisis many funny things may happen. You should be prepared.
Long term strategy – Don’t touch anything to do with your long-term strategy, because if you cut off all your limbs, how will you move when the recovery comes? He said he knew of one company that cut almost half its employees and then missed out on a major contract because they could not handle it with the newly-reduced staff numbers.
Chow said he also highly recommends salary cuts and reduced employee benefits in difficult economic times, but only for C-level and management-level people, even just as a token, because he wants staff to ‘feel’ the financial crisis; to know the company is in crisis mode. His thinking is that if a company doesn’t do anything to ‘pinch’ them, management does not have this ‘crisis’ mindset. They need to feel the pain to know the injury.
Some other interesting recommendations?
• In order to strengthen risk and compliance efforts, companies should strengthen, not cut, the workforce of the internal auditor.
• Communicate more with stakeholders—customers and suppliers—because they should be your partners, you cannot work alone. Treat them well in hard times and they will help you when the tide turns.
• Identify the most profitable business model and do your profitability analysis.
• Bankers are only concerned about your repayment, not your problem. So only talk to them when you are financially healthy.
• During the downturn, companies should ask their sales people to have more contact with their customers, to visit them more often and to work with them on some project, not to pressure them for sales, but to build stronger relationships which lead to strong market share.
• Set realistic targets and goals, because the economic downturn means times have fundamentally changed. Setting unrealistic targets can only de-motivate and de-moralise staff.
• In good times, all your employees are ‘heroes’ but in the down times, you can really see who is working.
• Economic downturns can be your ‘friends’ because they reveal leaders—the people who start work early and finish late. Tough times also means there’s more time for team building and greater communication of corporate vision.
I found Chow’s presentation very interesting because, as often is the case, his recommendations did not necessarily reflect traditional thinking. As they say ‘success leaves clues’ and it’s always well worth listening to those who have ‘been there and done that’.
Ross O. Storey, currently the Managing Editor of Fairfax Business
Media Asia, is responsible for the editorial content and production of
MIS Asia, CIO Asia, Computerworld Singapore and Computerworld Malaysia
magazines.
