Worthwhile article by Justin Wasserman // Kotter Contributor about usual and unusual suspects, listening, being present and empowering while not dictating. And a despaired and arrogant leader.
'Give Me Two Hours, And I Can Cut $250M'
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I write about strategic agility, leadership and culture change.
The economy is facing the end of a prolonged boom, and leaders across industries are dusting off their cost-cutting playbooks to navigate present and predicted market volatility. As a result, we’ve seen an emergence of widespread workforce layoffs—with some of the deepest cuts made by industry giants like G.M. and Wells Fargo.
Often times, however, these large-scale layoffs only provide a short-term fix for a long-term problem and, if done unnecessarily, can have lasting repercussions that put continued success at risk.
A number of years ago, I was working with the leadership team of a large hospital system facing severe cost pressures. By their initial estimates, they would need to cut $1 billion in the next year to respond to a shifting business model and shrinking revenues. The CFO, in a dual moment of arrogance and despair, announced, “I can cut $250 million by lunchtime.”
Sadly, this type of scenario has played out countless times across corporate board and executive team meetings—but it’s myopic, lazy, dangerous and value-killing.
So how can a company limit unnecessary layoffs and preserve employee engagement, while also cutting costs to safeguard against an economic downturn?
Leaders should start by looking beyond the usual suspects—top performers, high potentials and employees who hold strategy or finance roles within the company—and activate the unusual suspects, from floor workers to machine operators to sales clerks. By empowering all employees—regardless of title or rank—with the freedom to be entrepreneurial, take risks and think outside of the box, leaders will mobilize their entire workforce and give a largely untapped population of individuals the chance to identify the next best cost-cutting strategy.
Here are three key steps leaders must take to find and empower their unusual suspects:
1. Suspend Judgement
I’ve been involved in billions of dollars in cost-cutting initiatives and have seen that when leaders are placed into survive mode, they tend to make short-sighted decisions. While workforce layoffs may seem like an easy and quick way to cut costs, doing so can throw employees into survive mode, and cause productivity and profitability to suffer well beyond the downturn. For leaders expecting employee engagement and productivity to bounce back like a rubber band following steep cuts, they are in for a rude awakening.
If leaders can suspend judgment on where the next best cost-cutting idea is going to come from, they will be able to authentically engage with employees at all levels—balancing ideas from high potentials who have risen through the ranks with creative thoughts from those who may be lower on the totem pole. This will give the unusual suspects a chance to participate and share valuable insights that are often overlooked in the event of a workforce layoff.
Seeing the pace of change for its group plateau inspired a global supply chain leadership team to mobilize employees at all levels and functions to generate new revenues, cut costs and enhance quality through a global change leadership program. In one facility, over $1 million was spent on waste water treatment from a third-party supplier until a floor worker questioned, “Why can’t we sell the water as a raw material for other industrial processes?” Doing so turned a million dollar expense into a $130,000 annual revenue stream and reduced CO2 emissions by 111 tons per year—making them more sustainable and competitive. This is the kind of idea that an executive leadership team would never uncover. Imagine the possibilities of systematically identifying hundreds—if not thousands—of these solutions? Not only would this require cuts to be less deep, but it would also energize employees and help maintain morale in the short- and long-term, by showing workers how meaningful their voice is to the ultimate success of the business.
2. Create a Culture of Accountability
Companies should veer away from centralizing authority based on those already recognized by management as “leaders.” It is the C-suite’s job to connect the dots between how every individual contributes to the larger strategy, vision and goals of the company. Leaders who can describe a future that’s infinitely more exciting than the status quo will create a culture of accountability and innovation that inspires the unusual suspects into action. With the right kindling, this action can spark ideas for how the company can trim, grow or redirect the resources necessary to weather a potential downturn.
At one large utility company, we brought together several cross-functional teams to investigate creative ways to improve the bottom-line. One team was asked to review inventory from multiple warehouses, organize obsolete and written-off parts, and sell them for as much as possible. While the impetus for bringing the team together was an approved $3 million capital expenditure to build a new warehouse, the team was able to create so much excess space by organizing and selling parts that they were able to avoid the construction of the new facility altogether.
What’s unique about this example is that senior leaders empowered the teams to solve a problem, but were not permitted to dictate the solution—that was entirely up to the team’s discretion.
3. Stop Trying to Cascade Your Company Direction
Once the conditions for successful change are created, the final step is to unify a company’s direction around focused goals with proper channels of communication. Otherwise it is innovative anarchy, and the employees answering the call for innovation may accidentally misdirect or cross-compete with others in the organization.
Every company has their mission, vision and values, but the vastmajority of the ones we see aren’t actionable. Even when companies have sharp strategic plans for how to get somewhere, they rely on the fallacy that the C-suite can “cascade” the messaging to line leaders, who can subsequently offer direction to their teams. This overreliance on formal communication channels fails to connect any meaningful dots two to three levels below the C-suite, causing confusion in how employees’ day jobs connect to the strategy, and why that’s important.
After company direction is unified, leaders can then activate the entire workfore against what matters most to the success of the business—giving people a sense of purpose, without diluting the company’s focus.
While personnel cuts are sometimes necessary, there is often opportunity for companies to approach cost-cutting in different ways. By leveraging a much greater proportion of the workforce, leadership teams can use a different cost-cutting playbook—one that doesn’t start with the CFO or with personnel cuts, but by harnessing the ideas of the unusual suspects. It’s leaders from outside the usual box who hold the power to create and sustain momentum that delivers results long into the future—capturing hearts and imaginations to fuel the organization’s ability to lead complex change in a fast-moving world.
Kotter is a consulting firm that helps clients amplify their own potential and overcome the barriers to leading complex change. Founded by the world’s foremost change expert, Dr. John Kotter, our work is grounded in decades of empirical research conducted at Harvard Business School and honed in the field alongside our partners. Together we identify and build leadership potential throughout an organization, creating a movement capable of sustaining results in an ever-changing world.