Memo to CFOs: Layoffs, Frozen Salaries Don’t Always Save the Most Money
Layoffs, pay freezes, pay cuts. Pretty simple cost cutting solutions for CFOs who’ve got tight budgets. Unfortunately, the slash and burn tactics for personnel may have been better applied in another area – inventory.
A recent survey performed by Greenwich Associates of midsized and small company “financial decision-makers” found that, in particular, midsized companies ($10 million to $500 million in revenue) that reduced their inventory, on average, saved 30% more ($520k inventory vs. $400 layoffs).
While that’s great news, the unfortunate part is that only 17% of the companies survey bothered with that particular cost saving strategy while 47% of those survey used “staffing reductions.”
The survey also found that while 37% of used pay freezes to reduced costs with an averaged savings of $245,000. Crunching the numbers, that’s nearly 53% less savings than the inventory reduction savings.
Of course, not all companies have inventory in the dusty-stacks-of-pallets-in-a-warehouse sense. This is especially true of the professional services/financial services area where, unfortunately, the staff are sometimes considered to be inventory.