January 30, 2008	Volume 8, Issue 5
Recommend this issue to a friend Join the Friends of Point Lookout HTML to link to this article…	Archive: By Topic    By Date Links to Related Articles Sign Up for A Tip A Day!
Create a perpetual bookmark to the current issue
| Follow @RickBrenner	Random Article

---

The True Costs of Cost-Cutting

by Rick Brenner

The metaphor "trimming the fat" rests on the belief that some parts of the organization are expendable, and we can remove them with little impact on the remainder. Ah, if only things actually worked that way...

hen organizations cut costs, decision makers often assume that the parts of the organizations that remain after the cuts can continue to produce at pre-reduction levels. They rarely do. For example, downsizing the Purchasing function can have ripple effects throughout the organization. And canceling one project can actually affect other projects even if they don't depend on the canceled project.

Fundamentally, organizations are systems. Moreover, they don't "factorize" easily — their parts are interconnected in ways that are outside our awareness. These interconnections sometimes propagate the effects of cost cutting. We tend not to notice these channels, in part, because they don't correspond to connections in the org chart or line items in the Chart of Accounts.

Unexpected propagation happens because the effects of cost cutting tend to travel not along formal lines, but along personal lines — that is, the relationships between people, and the perceptions and emotions of everyone in the organization, including the people who we believe ought to be "unaffected" by the changes.

Here are some examples of how the effects of cost cutting propagate. If your job entails estimating how much time or effort tasks require, and if your organization is in the midst of reductions, you'll do a little better if you take these effects into account.

Personal network disruption

Waves of reductions in force tend to disrupt the networks people use to find out how to do things — how to prepare requisitions, which procedures to follow, or where to find the answers to burning questions. Relocations and site consolidations have similar effects.

Change-driven chaos The effects of cost cutting
tend to propagate along
personal lines — perceptions,
emotions and the relationships
between people

The entire organization can descend into change-driven chaos. People become distracted and performance degrades, especially when procedures and job responsibilities change rapidly. Many begin working for new supervisors, with whom they must establish new relationships. Some find themselves working for supervisors with whom they might have unpleasant history.

Termination-induced grief

When groups of friends are separated because some have been terminated, the survivors enter a period of grieving, sometimes called "survivor's guilt." Their productivity can degrade significantly.

Voluntary turnover

When things get sour, people begin to fear they will be targeted next. Those with alternatives elsewhere (usually the most talented) start job searches preemptively. Vesting schedules for stock options, profit sharing, and pension plans lose their ability to hold people, because of skepticism about the value of the underlying benefit.

The what's-the-point effect

People who notice ways to reduce costs, and people who would otherwise either contribute innovations or prevent catastrophes, start to ask, "What's the point?" They begin to feel that they won't be rewarded for their trouble, or that they might be terminated before being rewarded with the next merit pay increases, which have often been suspended anyway.

If you're weighing a decision to cut costs, estimating the full impact of these effects might improve the quality of your decision. And remember that personal network disruption, chaos, survivor's guilt, and the rest, might affect you, too. When that happens, it can degrade your ability to notice these effects. Is it already happening?  Top    Next Issue

---

Are your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!

Would you like to see your comments posted here? Send me your comments by email, or by Web form. Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

More articles on Organizational Change:

Don't Rebuild the Chrysler Building

When we undertake change, we're usually surprised at the effort and cost required. Much of this effort and cost is necessary because of the nature of the processes we're changing. What can we do differently to make change easier in the future?

Workplace Taboos and Change

In the workplace, some things can't be discussed — they are taboo. When we're aware of taboos, we can choose when to obey them, and when to be more flexible. When we're unaware of them, they can limit our ability to change.

Beyond WIIFM

Probably the most widely used tactic of persuasion, "What's In It For Me," or WIIFM, can be toxic to an organization. There's a much healthier approach that provides a competitive advantage to organizations that use it.

The Ties that Bind

Changing anything in an organization reveals how it's connected to its people, to its processes, to its facilities, and to the overall context. Usually, these connections reach out much further into the organization than we imagine.

On Beginnings

A new year has begun, and I'm contemplating beginnings. Beginnings can inspire, and sometimes lead to letdown when our hopes or expectations aren't met. How can we handle beginnings more powerfully?

See also Organizational Change and Project Management for more related articles.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact me for details at rbrenner@ChacoCanyon.com or (617) 491-6289, or toll-free in the continental US at (866) 378-5470.

Get the e-book!

Past issues of Point Lookout are available in four e-books:

• Get 2001-2 in Geese Don't Land on Twigs (PDF, USD 11.95)
• Get 2003-4 in Why Dogs Wag Their Tails (PDF, USD 11.95)
• Get 2005-6 in Loopy Things We Do (PDF, USD 11.95)
• Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, USD 11.95)
• Get all of the first eight years (2001-2008) in Eight Years of Point Lookout (PDF, USD 26.95)

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

Organizational Politics for People Who Hate Politics

Have you ever felt powerless to implement an important new idea? Have you ever been "blind-sided" at a meeting? Have you ever lost two good employees because you could find no way to keep them from attacking each other? These are some of the issues of organizational politics. Many of us have become enmeshed in them from time to time, but we've also known some people who seem to be able to engage and prosper. How is that done? We'll inventory the challenges of organizational politics, and provide tools for anticipating and addressing them. The focus of this program is practical — attendees learn concrete techniques for dealing with the problems that arise in workplace politics, while keeping their integrity intact. Read more about this program. Here are some upcoming dates for this program:

• Download to
  your calendarRichmond, VA (South Side): March 17, Southside Dinner Meeting, Central Virginia Chapter of The Project Management Institute.
   
• Download to
  your calendarRichmond, VA (West End): March 18, West End Dinner Meeting, Central Virginia Chapter of The Project Management Institute.
   
• Download to
  your calendarThe Conference Center at Bentley in Waltham, MA: May 1, Professional Development Day, Massachusetts Bay Chapter of the Project Management Institute. Register now.
   

The Race to the South Pole: Ten Lessons for Project Managers

On 14 December 1911, four men led by Roald Amundsen reached the South Pole. Thirty-five days later, Robert F. Scott and four others followed. Amundsen had won the race to the pole. Amundsen's party returned to base on 26 January 1912. Scott's party perished. As historical drama, why this happened is interesting enough, but to project managers, the story is fascinating. Lessons abound. Read more about this program. Here are some upcoming dates for this program:

• Download to
  your calendarMelbourne, FL: April 12, Monthly Meeting, Space Coast Florida Chapter of the Project Management Institute. Register now.
   
• Download to
  your calendarHilton Garden Inn, Idaho Falls, ID: April 15, Professional Development Day, Eastern Idaho Chapter of the Project Management Institute.
   
• Download to
  your calendarThe Conference Center at Bentley in Waltham, MA: May 1, Professional Development Day, Massachusetts Bay Chapter of the Project Management Institute. Register now.
   
• Fort Wayne, IN: September 22, Monthly Meeting, Northeast Indiana Chapter of the Project Management Institute.
   
• Overland Park Convention Center, Overland Park, KS: October 4, Professional Development Day, Kansas City Chapter of the Project Management Institute.
   
• Download to
  your calendarMITRE, in Bedford, MA: February 15, 2011, Monthly Meeting, Boston SPIN.
   

Person-to-Person Communication for Project Managers

When we talk, listen, send or read emails, read or write memos, or when we leave or listen to voice mail messages, we're communicating person-to-person. And whenever we communicate person-to-person, we risk being misunderstood, offending others, feeling hurt, and being confused. There are so many ways for things to go wrong that we could never learn how to fix all the problems. A more effective approach avoids problems altogether, or at least minimizes their occurrence. In this very interactive program you'll learn a model of inter-personal communications that can help you stay out of the ditch. In those moments of intense involvement, when we're most likely to slip, you'll have a new tool to use to keep things constructive. Read more about this program. Here's an upcoming date for this program:

• Download to
  your calendarHilton Garden Inn, Idaho Falls, ID: April 15, Professional Development Day, Eastern Idaho Chapter of the Project Management Institute.
   

The Politics of Meetings for People Who Hate Politics

There's a lot more to running an effective meeting than having the right room, the right equipment, and the right people. With meetings, the whole really is more than the sum of its parts. How the parts interact with each other and with external elements is as important as the parts themselves. And those interactions are the essence of politics for meetings. This program explores techniques for leading meetings that are based on understanding political interactions, and using that knowledge effectively to meet organizational goals. Read more about this program. Here are some upcoming dates for this program:

• Download to
  your calendarHilton Garden Inn, Idaho Falls, ID: April 15, Professional Development Day, Eastern Idaho Chapter of the Project Management Institute.
   
• Download to
  your calendarWherever you are: it's a webinar: August 3, Monthly Meeting Webinar, Memphis Chapter of the Project Management Institute.
   

Human-Centered Risk Management

Most of us can assess technological risks, but risks related to human behavior tend to resist our best efforts. This session provides a framework for evaluating risks related to the behavior of individuals, teams, organizations and people generally. Human-centered risk differs from technological or market risk, because objective evaluation requires acknowledging personal and organizational limitations and failures. Since some of those limitations and failures might apply to the people assessing the risks, or to their superiors, there's a tendency to deny them or to explain them away. Our approach examines capability, organization, context, risk mitigation, and workplace politics. It has tools for guiding the assessment and management of human-centered risk, and we show how to extend these tools to suit your situation. You'll learn how to identify sources of risk in human behavior; recognize systemic and individual barriers to acknowledging risk; assess the effects of organizational turbulence; determine the risk associated with inappropriate internal risk transfer; estimate the effects of team dysfunction, toxic conflict and turnover; and measure the impact of workplace politics. Read more about this program. Here's an upcoming date for this program:

• Download to
  your calendarHilton Garden Inn, Idaho Falls, ID: April 15, Professional Development Day, Eastern Idaho Chapter of the Project Management Institute.
   

Managing Virtual Teams for Real Results

Managing global or dispersed teams is challenging — miscommunications, misunderstandings, and interpersonal conflict all thrive in the typical environment of the distributed team. And they're even more common in global teams, because of time-zone offsets and language and cultural differences. We'll inventory the challenges distributed and global teams face, and provide tools for anticipating and addressing them. The focus of this program is practical — attendees will learn concrete techniques for preventing and dealing with the problems that accompany global and distributed teams. Read more about this program. Here's an upcoming date for this program:

• Download to
  your calendarKitchener, Ontario: May 19, Dinner Meeting, PMI Canada's Technology Triangle Chapter.