It Matters How You Slice It! Don’t Cut Expenses at the Expense of Your Business

By Irene Williams • July 1st, 2009

scissors-cut money “They’re rationing paper clips!”

I’ll never forget my client lamenting her company’s crackdown on office expenses. She was a director-level, 8-year veteran of the organization. She was responsible for a departmental budget that topped a few million dollars annually and had four direct reports she managed. Then one day, she dashed to the supply closet for a pack of paperclips only to find the door locked. No warning. No memo. No idea who held the key. She was incensed.

This corporate decision to trim expenses really cut into morale—into the fiber of trust—that employees had with upper management. This may sound melodramatic, but as a contracted service provider for that company for over a decade, I observed the “paper clip incident” to be the first thread that ultimately led to an unraveling of the infrastructure.

Of course, companies should be cost conscious. It’s not necessarily wrong to put a lock on the supply closet door. There should be checks and balances, budgeting and planning, auditing and actions to ensure businesses don’t bleed funds. Trim costs? Manage expenses? Absolutely!

Yet it’s vital to remember it does matter how—and where and when—you slice.

In the aforementioned example, the great irony was that company officials were still spending big on customer outings, entertainment and travel, even as they quietly put a lock down on office supplies. Even casual observation revealed the method for cutting expenses was askew. Clearly that business wasn’t going to run aground due to the cost of paper clips and post-it notes!

Often, cutting expenses is a reactionary move. That was certainly the case at this client company. Profits took a dip, thus expenses took a hit (and paper clips got clipped). If only the businesses had proactively managed costs, cash would’ve been flowing fine even in those lean times. And certainly, decisions made under duress are usually not the best. In this instance, the company put even director-level employees on the defense and invited scrutiny and animosity.

Today’s economy is certainly a challenging one, and we’re well into a cycle of dealing with the current realities. Businesses aren’t just trimming or halting spending; many are closing and unloading. Hindsight’s 20/20—yes, but one can’t help wonder how many of these companies in stress today could’ve avoided the drama if they’d sliced budgets more wisely in days past.

Take an honest look back at your business expenses, not to play “what if,” but to objectively assess what you could’ve, should’ve cut and trimmed even in the salad days. Now’s the time to learn the lessons to carry us forward, to find the solutions that maintain or improve productivity while containing spending. It does matter how you slice it; cutting expenses incorrectly is something most businesses can’t afford to do.