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As the economy worsens and companies struggle to make adjustments needed to stay afloat, many of them may be tempted to concentrate on their short-term need to cut costs, and disregard the long-term impact to their brand or the health of their customer relationships. Short sightedness in making cost cutting decisions may allow them to meet their immediate needs but ultimately it could negatively impact their ability to stay in business or rebound when the economy turns around.

A recent survey conducted by Challenger, Grey & Christmas, Inc., a global outplacement and business coaching firm shows the level of diversity in how companies are approaching the need to reduce costs. The survey which included feedback from approximately 100 human resource executives in a variety of industries showed that 82 percent of the companies have employed at least two cost cutting measures with the average number of measures initiated being 5.3.

How companies are reducing costs

• Reduced Travel Expenses 66.7%
• Hiring Freeze/Reduction 57.8%
• Permanent Layoffs 55.6%
• Cancelled Employee Holiday Party 32.0%
• Other 31.0%
• Reduced Or Eliminated Other Perks 29.0%
• Salary Freeze/Reduction 27.2%
• Reduced Year-End Bonus 26.7%
• Cut Workers’ Hours 24.4%
• Eliminated Year-End Bonus 22.2%
• Temporary Layoffs 15.6%
• Canceled Customer Holiday Party 11.0%
• Cutback Tuition Reimbursement 10.8%
• Reduced Or Eliminated Matching Contributions To Employees’ 401(k) Plans 11.0%
• Forced Vacation 8.9%
• Four-Day Work Weeks 7.0%
• Instituted Furlough Program 6.7%
• Cut Office Space Through Increased Telecommuting 6.7%

While 56 percent of the companies surveyed had conducted permanent layoffs, an interesting trend, as noted in the report, is the number of companies who have initiated across-the-board salary reductions in place of large scale layoffs. Nearly 30 percent of the survey respondents have instituted a salary freeze or reduction because of the down turn. While these cuts are not always welcome, companies are hoping that salary cuts vs. layoffs will help them retain high performance workers. The report does not specify, but one would hope that these reductions would be temporary. By reducing turnover, companies are able to retain valuable intellectual property which has a direct impact on their ability to provide a higher level of service to their customers.

Any way you look at it, cutbacks are painful and in today’s economy more common place than we would like.  Whether companies initiate one or all of the cost cutting measures listed above, they must do so in such a way to insure they are doing everything they can to protect their most valuable assets, their clients and their talent.