How Leaders Reduce Resistance And Resentment When Cutting Costs

A CEO and their team explored the following question at a recent meeting: How will we evolve our current operating model and organizational structure to reduce expense and improve efficiencies? Interest rates and other external shifts were putting massive pressure on the CEO’s business and they were considering a range of options where cost reduction was at the center.

What leaders already know is that a discussion about cost is never just about cost. Even when we all know it must be done, that doesn’t make it easy. Cost cutting raises all kinds of emotions across the workplace, from fears about being able to reach goals with fewer resources, to resentments about why one leader has to tighten the belt more than another. So how can we have productive discussions about cost, budget, and doing more with less? Consider these ideas:

Describe the moment you’re in with care.

A senior leadership team at a major retailer was tasked with modernizing the company’s infrastructure. Given the enormity of the project, the team had access to significant funds beyond its annual budget. When the project ended and funding stopped, the team characterized the change with comments like, “this will be really tough, the future is going to be hard.” No question, the shift in funding would have an impact, but the team’s messages were casting a dark shadow on the rest of the organization. As morale dropped, the team realized they had to meet the moment they were in very differently, starting with how they characterized the moment itself.

Get an updated definition of how your stakeholders define value.

Conversations about cost inevitably raise important ideas about delivering and receiving value. When cost pressures rise, it’s no surprise that organizations and leaders want to understand, “Am I getting the value I’m paying for?” For those on the receiving end of those questions, here’s an opportunity to better quantify and articulate the value you provide and how that value translates into outcomes that your stakeholders care about. It’s also a moment to clarify how your stakeholders define value now. This may seem like an obvious step, but definitions of value can change quickly, and what stakeholders were willing to pay for a couple of years ago may no longer be the case today.

Waste may be hiding in plain sight.

When it comes to reducing expenses, companies understandably implement a wide range of strategies, from restructurings to divestitures, and more. What gets less attention are areas of waste and inefficiency hiding in plain sight. A powerful example of this comes from a Bain & Company study that gathered data about how employees spent time at one large company. The analysis was astonishing, revealing that one weekly executive team meeting cost the company 300,000 hours annually in employee time to support it. As incredible as this example is, what’s equally noteworthy is the fact that there is an example to study in the first place. Rare is the company that tracks the number of hours its employees spend in meetings, yet the cost of this in time and dollars is astronomical. Whether meetings, reporting, or QBRs, consider areas that are on autopilot at your company, and take a fresh look at how to make them more efficient, productive, or reduce altogether. It may not have the financial impact that a restructuring would, but most employees celebrate when they have the opportunity to remove wasted time from their calendars.

More radical questions.

A company was struggling with getting employees to adopt their hybrid work policy and spend time at headquarters. After dozens of meetings on the topic, the CEO shifted the focus from, “How do we reduce resistance?” and instead asked: “Do we even need a corporate headquarters anymore?” His paradigm-shifting question really shook things up and pushed his leaders to radically rethink options. It wasn’t long before they rallied around a new idea to transform headquarters into something closer to a special events center that would showcase new products and serve as a cultural hub for employee events and meetings. It was not lost on anyone that this new model was far more cost effective than maintaining their traditional corporate offices, and you could feel the positive energy rise as leaders and teams began to develop plans to evolve their workspace space for the future.

Reducing expenses inside an organization may be the right thing to do, but that doesn’t make it easy. Cutting costs can quickly produce feelings of fear and mistrust as employees think, “Here we go again,” and see a glass half-empty work future ahead. It doesn’t have to be this way, particularly if leaders can help us see this as a moment where we get to get rid of what we no longer value, remove the things that create waste, and become better employees and people as a result.