Mat Jacobson was asked recently to contribute to an article in Business First Magazine about what causes the reduction of operational costs and how mangers should minimise the damage. His response was included in the piece along with a number of business experts, leaders their fields.
“To be honest the topic is a bit obscure as it assumes that a reduction in operational costs necessarily will incur some damage. If reducing operational costs is the objective, then the first item on the agenda would be to look at ways to simultaneously reduce costs and enhance business outcomes. For example, it might be cheaper and more efficient to outsource IT hosting as opposed to hosting all data on internally maintained infrastructure. If done properly there should be no need to minimise damage, in contrast, there should be enhanced outcomes for both the business and customers.
In some situations though, a cost reduction does create a negative impact. For example, a decision to move all customer service operators off-shore. There are obvious cost reduction benefits and these may be necessary in order to maintain profitability. This will of course have an enormously damaging impact on the retrenched workforce, but the longer term risk to the business is far greater, that is the potential brand risk in customers dealing with low paid, international workers without a strong loyalty to the business, just to cut costs.”
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