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Why cutting costs Companies are desperately seeking ways to cut costs which mostly means cutting jobs But this is no panacea RUNNING a company in boom times is relatively easy A downturn is less forgiving mistakes show up at once Now many executives are living through a deterioration in the business climate more abrupt than they have ever experienced and having to take decisions they have never faced before Todays judgments will determine whether their company survives the difficult year ahead Most of those decisions centre on cutting costs Companies have switched abruptly from managing for profit to a frantic search for ways to conserve cash The effect of uncertainty says Rick Wagoner chief executive of General Motors is that we have to focus on running the business day-to-day putting a lot more attention on short-term issues The long term is impossibly uncertain the short term is where money will be made or lost So British Airways is combing through its operations to look for ways to keep cash says David Spurlock its strategy director One obvious way is to adjust capital spending on new aircraft BA is also trying to manage overtime working more efficiently as an alternative to making even bigger redundancies Where sacking people involves paying large severance packages restricting overtime may be a more cash-friendly option Another way to save cash is to scrap purchases of non-essential services During the 1990s companies farmed out all sorts of peripheral activities Daniel Pink an American writer described this human outsourcing as a move towards a free-agent nation Now many free agents are early casualties of cost-cutting A partner in a small public-relations business in London complains The terrorist attacks came just as our big customers were setting their budgets for the coming financial year Weve started to get letters giving us three months notice to end our contracts Many companies find it cheaper and easier
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