How to trim the fat in lean times – budget cuts, shared services and interim managers
30th July 2012
It was recently reported that thousands of NHS staff could be facing the sack unless they agree to take a pay cut. Hospital managers, like managers in many other sectors, have been given the difficult task of balancing the books to revised figures, given the ongoing economic climate.
But are pay cuts and redundancies the only answer or should they be a last resort?
While cutting staff numbers may seem like the most obvious solution in terms of the bottom line, it often involves significant costs that make the net saving much less. The most obvious is any severance package due to the employee, but there are also future recruitment costs to consider when the need to re-hire comes around again, as well as the negative effect on productivity with the subsequent increased shared workload when you’re a man or woman down.
So before leaping into Alan Sugar mode, consider the impact this short term measure might have on the future success of your business – assuming that as well as cutting back you also want continued growth – as there are other options worth considering.
Firstly, look at the percentage the board have asked you to cut and before you accept it, do your homework. If you have stats and supporting facts, there is no harm in negotiating the dreaded number, in the interests of your department. Compare your productivity to other areas of the business and to a time before you were staffed as you are now. Project the growth at current employee levels compared to any revised budget and confidently predict what would happen with the proposed number. You may hear a smaller percentage cut coming back to you.
Secondly, consult your team for ideas of its own. There may be voluntary options that come from your staff that you don’t even have to suggest, such as early retirement or job sharing. Consult with key individuals on supplier contracts – they will know better than you if there is a cheaper alternative available.
Marketing and training and development are also areas that quickly find themselves on the chopping block in times of cost cutting. But before you axe them too hard, consider the impact of your actions on future growth plans. Could these areas be pooled into shared services with other departments to save costs? If so, take the opportunity to review suppliers and renegotiate contracts where possible.
Finally, if you are forced to cut personnel and enter into a period of transition, consider the use of a senior interim manager to guide you through. Short-term, experienced and with no paying off when they’ve completed the project and leave, an interim executive can come in at a moment’s notice to help steer the ship through this rough patch. An interim will ensure there is no drop in productivity and that every opportunity is maximised for the future.
You cannot cut your way to long term success. 20 years of working with Public institutions and around the world have helped me learn approaches that allow commercial thinking and processes can be integrated into legacy public service institutions, even as big and iconic as the NHS. I am currently working as an interim and part of the team involved in the first NHS trust run by a private company under licence. There is a long way to go and hurdles to over come but in past year 90% of the annual deficit has been eradicated, the trust has turned from being the annual decision whether to close to taking on work from surround parts of the health care community. The stability, release of funds to invest, is restoring some faith in people in the trust who joined to give service. It is hard but possible to both save money and grow!