We all know that you can’t save any money if you don’t earn any money. But on the corporate bottom line is saving a few bucks the same as earning a few bucks? Unfortunately for those of us who are employed saving money is close enough to earning. Why do I say unfortunately? Well, if you have ever been the victim of a RIF (Reduction in Force, AKA a layoff) then you know why it sucks to look at savings and earnings in the same light. But the story is not all bad, read on to see why…
The good news for those of us with brains in our heads is we can be part of the cost savings, or the earning, or better yet, BOTH! The reason that most companies lay people off is that when SG&A (Selling, General and Administrative) expenses are not in line with the companies revenue, people tend to be the easiest place to save a few bucks. When you RIF someone, you eliminate their salary expense pretty immediately. In other words, the savings show up in the expenses very quickly. If you are faced with $1 million less in revenue for a quarter, and say $150K less in profit than expected, reducing SG&A by $150K balances out the loss. So the bottom line is, less revenue with less expense but the same percentage of profit.
Of course most of the time a layoff is not a good long term strategy. The reason for this is simple, people help companies make money. Take a sales force for instance… Each sales rep is tasked with doing a certain amount of sales, this generating revenue. Sometimes a sales rep does not perform at the level the company would like. In other words the company’s revenue is lower than they want. In lean times, said company might lay off this under performing sales rep. This eliminates some expense to offset the loss of revenue, but it also limits the potential revenue the company can reach. There was a reason they hired that sales rep in the first place; the intention was add additional revenue, now that person can’t contribute as they are no longer employed. I pick on sales because it is very easy to draw the correlation between their performance and company’s bottom line. The problem is the same thing applies any time there is a RIF, whether sales or anyone else. In some way we all contribute to the company’s revenue stream (or else we shouldn’t be here).
So now that we know how the layoff is used as a financial tool, lets look at earnings… Every company exists to make money. Without money we can not create the products or services we sell. Without products there is no revenue, without revenue there is no company. It doesn’t matter if you are a non-profit, a government entity, a private company or a multinational conglomerate, you are in business to conduct business. In the perfect world, everything would run like a top all the time. The profit the company generates would always be enough to pay the bills, reinvest in the business, and send everyone home with a healthy bonus this time of year. But we all know that not everything in business can be perfect all the time.
The question is whether or not you are making the best use of the money your company spends on the thing you do. If that thing is IT, do you do it the best way possible? Do you have the time to help contribute to increasing the companies earnings? Do you systems and processes facilitate doing the most profitable business they can? When someone asked for a new project to get off the ground, could you turn in around in an acceptable time-frame? If the answer to any of these questions is “no,” do you know the impact of the results?
When it comes down to it, we can wither contribute to the revenue of the company in a meaningful way or wait until someone needs to reduce expense again and hope for the best. As an employer I will always look at how the people effect the revenue, and ensure that I can quantify that fact in a way that shows my management, the company makes more than they spend by employing me and my team.
If everyone builds their teams with that same goal, then earning will always outweigh savings when it comes to people.
