Cost cutting is almost always the first thing companies do during an
economic downturn. If you cannot avoid cutting cost, you can at least carry
out a cost reduction exercise in a more systematic way that will not drive
your employees to social media and start talking bad about you.
*Cost reduction: Top 5 ways to get employee buy-in*
If you’re like other entrepreneurs, cost cutting is an important priority
for your business, but a challenging one to implement.
One of the most important ways to reduce costs is by finding and
eliminating waste throughout your company. This means getting rid of
anything that doesn’t earn your company money.
But to do so, you need the input and buy-in from your employees. And that’s
where many business owners run into resistance that can doom their efforts.
“You have to involve employees in decisions and develop a waste-cutting
mindset,” says Patrick Choquette, a BDC Business Consultant who advises
entrepreneurs on operational efficiency.
Choquette offered the following steps to get employees onside with your
cost reduction efforts.
*1) Be fully transparent—The first step is to trust your employees and
share information about where you see opportunities to reduce spending and
“Treat employees as if they’re business people themselves,” Choquette says.
“Tell them the cost of waste. That will encourage them to act like business
people and take ownership of cost reduction.”
Also, ensure employees understand your focus isn’t on cutting jobs, but
eliminating waste in the company.
*2) Collect and share data—If you aren’t already doing so, measure your
performance in a few key areas where you want to make improvements.
Examples are lead time, machine output, set-up time and idle time.*
Make sure everyone in the company is regularly looking at your performance
data. “Just measuring your performance can be eye-opening for employees and
encourage them to get onboard with cost cutting,” Choquette says. “That
will stir creativity big-time.”
You should use dashboards to show the data in a way that’s easy to
understand, he says. Be sure employees get the training they need to
monitor the information effectively.
*3) Meet regularly—Hold weekly meetings with employees to discuss your
performance data and waste cutting progress. *This will help make
efficiency a top-of-mind part of your business culture.
*4) Get their input*—During and between meetings, invite employees to
suggest ideas. Your workers are often the people who know best where waste
lies in your business. You can devote a part of your regular meetings to
You should ask for not only large-scale projects, but also smaller,
incremental improvements that you can put in place quickly, with existing
resources. Consider implementing one such idea each week.
“Many of the ideas will succeed. But even if an idea fails, it’s still a
useful learning experience,” Choquette says. “Over time, your success rate
will improve. It’s like compound interest. It builds up over time.”
The process will also help show employees their ideas are valued. And it
will help encourage a waste cutting culture to flourish.
*5) Boost training *—Look for ways to train employees to improve and grow.
Worker training leads to 3 to 5% more productivity versus employees who
didn’t get training, according to research sponsored by the Social Sciences
and Humanities Research Council of Canada.
Training can also build employee engagement and motivation. At your regular
meetings, discuss training options that could help with slashing costs.
Keep in mind that training includes not only formal classes, but also
informal learning such as job shadowing, mentoring, focused reading and
experimenting with waste-cutting projects.
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