Tweet

What Are Some Major Personnel Cost Reduction Strategies for My Business ?

Guest post by: Stan Prokop

Article Overview: The articles provide insights as to how firms need to view headcount ,personnel and salary strategies when undertaking cost saving measures , while providing recommendations in these areas.

What Are Some Major Personnel Cost Reduction Strategies for My Business ?

Business owners and financial managers know that cost reductions can increase profitability and decrease any financial losses the business may be experiencing.

To be successful in this area management must be able to properly assess how the expense reduction will impact the business - we are saying that it is not just necessary to cut costs, it is as important to understand how they will affect the business in the long term. Quick example - you reduce headcount drastically and then find you can fulfill a major contract or order! Not good.

Therefore we are saying that any expense reductions should ensure that management has a general sense that customers and orders can be serviced and that the company is not hindered from growing.

Probably headcount is the area that all management always focuses on first, rightly or wrongly so .Part of the is just the obvious fact that the salary component of any firm is usually one of the biggest operating costs. And less obvious, but as important is all the indirect costs associated with a payroll, such as unemployment insurance, workers compensation, health benefits, bonuses, etc.

A solid strategy sometimes is simply to focus on some of those indirect items and negotiate a lower cost in many areas - i.e. keep the people but restructure benefits, bonuses, sick days, vacation allowances, etc. However at the end of the day good employees must be paid market value, if not they will go elsewhere, usually to a competitor if they are marketable. In smaller business indirect expense restructuring seems to make more sense, in a larger business it could be a recipe for disaster re morale, competitors, etc.

Getting back to direct headcount naturally terminations are a major cost reduction, at the end of the day this needs to be handled properly within current legislation, etc.

To replace employees firms can of course look to outsourcing, getting temps on staff, or bring in friends and family to assist where appropriate, which might be more reasonable for a small family owned business. Many business professionals believe that any company can reduce headcount by 10% and still keep their business on a smooth keel. This is achieved by focusing on high performers, combining functions, checking out government programs, etc.

More and more firm's sub-contract parts of their business to experience third parties as an offset to the headcount reduction .In certain firms lesser paid employees can be given more responsibility, i.e. a promotion, which has the dual effect of positive employee morale and direct savings.

In summary, there are various cost reduction strategies available to a firm. One of the largest is the focus on salary/wages and headcount. Any actions taken should be done carefully, and it is highly recommended owners focus on long term effects to the business. Many headcount strategies can be implemented without long term damage to the business and its growth.

Related Articles
  Wanted: jobs for Africa’s youth - Job Plans
  Conquering Racial Profiling in Our Local Communities
  What are the 3 biggest challenges faced by supply chain/purchasing professionals today? (Survey Result 20)
  Recommendations for future research - Factors Impeding the Poverty Reduction Capacity of Micro-credit: Some Field Observations from Malawi and Ethiopia
  5.1 Is there a poverty reduction crisis? Training outputs and impacts
  STRATEGIC PURCHASING by HARVEY SCHILLER
  Advertising For Entrepreneurs - PPC On A Tiny Budget
  1.19 Building trust: Working Out of Poverty
  Facts About Young Drivers Car Insurance
  1.16 Building a more inclusive global economy: Working Out of Poverty
  Tax Deferral or Tax Reduction – Cost Segregation
  What Do You Need to Do To Move Your Sales Team To That Next Level?
  What Makes Fast Teams Too Slow?
  1.5 Skills development for sustainable livelihoods: Working Out of Poverty
  Marketing Strategies - What Should a Banner Advertising Campaign Look Like?
  Wanted: jobs for Africa’s youth - Policy Reforms
  Anger and Stress Increase Risk for Heart Disease: What to Do
  1.15 Building an employment agenda: Working Out of Poverty
  HUD adds another $1B to Stabilize Hard-Hit Neighborhoods...Total $7B
  Moving Forward: International Financial Institutions

Article Tags: cost reduction strategies, headcount savings



Related Forum Posts
Re: Fashion - Nana, At you choice you may choose to research the fashion industry a bit more. There is obviously a Business side to it as well as a creative side to it. Find out all the types of roles that exist in the industry. Some that come to mind merchandiser, Window dresser, floor plan organizer (someone needs to determine the layout of a retail store to best sell the goods), fashion consultant (Yorkdale mall has fashion consultants that take you around and tell you what looks great on you - you also get a cut from the sales). This is what I've observed from the business side, you may know more. All these roles I've written about will help you grow as a business person and make the contacts in the industry...possible stepping stones. But further more you'll also notice that you need to develop some business acumen possibly tailored to the fashion industry. When I was at Ryerson I knew I wanted to be an entrepreneur someday too. I knew I needed some basic business courses to get a foundation to build from. I was in a Tech/Business Major (I'm sure Fashion has something similar - Fashion/Business Major) and then started to create my own minor. Here are some of the courses I took: Marketing, Law, Entrepreneurial, Management, consulting.. and a few more . Also, I'm sure that within the Fashion Major there are also courses you have to take where you can use your creative side and create designs. Typically within a Major there are focuses you can choose - ask the program coordinator. Your next step is to do some research. 1. Visit Commercial retail outlets like H&M, Banana Republic, or jacob. Tell the Manager your doing some research for University and would like to know what types of Corporate roles exist aside from the roles on the retail floor (like sales associates). If she asks you to elaborate then you can use some of the roles I mentioned above. 2. With this information in hand you can visit the Ryerson Fashion department and inquire with the Program Coordinator on what focus within the Fashion Degree would help you the most. In my program there were 5 different focuses within the Tech/Business program. Just a quick aside. A good friend of mine too has a dream of fashion. he want to create a niche fashion line tailored to skinny men (I can't mention the style). He's in Business school but not in the Fashion program... He's in International Business but all his Minor courses are tailored to running a successful business ... similar to the ones I mentioned above for myself. I have no doubt in my mind he'll make it 'cos his vision is that strong.
No fee biz banking - I miss Bizsmart - it was a great no fee banking option for businesses but I guess the company wasn't making much returns and had to shut down. Are there any other no fee or Low Cost Business banking options still available in Canada?
Nana excercise - Nana > answer the following: 1. If you had no chance of failure what would you dream to be your ideal Job or Business? 2. What about this dream excites you? 3. What Field of Study (Major) will get you closer to this dream? 4. What other Field of Study would "compliment" (Minor) your dream to get you closer to it. REMEMBER: there is no wrong answer. I'm hoping this exercise will help place you in a program that makes you excited at a "most probable likely" future. Your answers will help open a dialogue on the forum.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
laptop vs. Desktop - I'm not a heavy gamer or graphics person so a Laptop is ideal for me for all the obvious reasons (portability, wireless, work on the go, etc etc) Major downside is the battery power and the cost to replace it - half as much as the cost of the laptop on my current IBM.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

LEARNING TO HAVE FUN – EVERYDAY!

Work Place Counselling

Five Ways to Show Honest Appreciation

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.