There are some rumors running around that Yahoo is cutting its workforce by 20%. It got me thinking about what’s the best bet to make when you are in a growth business, but not getting the traction you want. First, cutting cost is easy to execute, although, most would agree that it’s not fun to tell someone that they no longer have a job.
But, I’ve always had questions about this strategy. Is cost cutting too short sighted? Will future growth be hurt. I’ve heard the argument that any large company could cut 20% and be better off. How do you know that you are cutting the inefficient 20%. Is it possible that you are left with a smaller company, with improved short term profitability, but still have all the problems of an inefficient organization.
Perhaps there is some motivating force (They still have jobs) for employees that improves productivity after a layoff. I don’t know.
Here are a few strategies I would consider in a large company that wanted to improve profitability over the long term.
- Smaller teams with more ability to make their own decisions to improve speed. In a software company I’ll take less planning and more engineers anytime. For people that have moved out of engineering. Move them back.
- Make more products that don’t feed off the corporate tit. For example, to make a product that gets five million visitors a month is easy for Yahoo because all they have to do is funnel the users from the homepage to the property. At some point this doesn’t scale and you have to make products that develop their own audience. I suggest to start and nuture projects for 2 to 3 years, but make them stand on their own.
- Increase customer support. Taking care of users goes a long way. I’ve seen this expense be cut a bunch of times. I always wonder, what would happen if we tripled or quadrupled what we spend on customer support. What if you could call anytime you had a question and never had to wait more than two minutes for technical support.
- Spend more innovating. We’ve all heard of the Google 20% time. Give the 20% you’re going to fire 100% and 2 years to create new profitable businesses. Stick them in a room and say Go! One of the most difficult things to extract the full value from employees is their creative juice. How many times do people hear, it’s not a priority, we don’t have the resources, put it in the queue….the list goes on and on. The truth is, in large complex organizations few people make the ultimate resource decision. I don’t know if this will every change. But giving small groups of people a charter of innovate and make a profitable business could really work.
- Failing. I succeed and fail every day. I try to learn from failures, even when it hurts. I also tell myself, make sure you still are failing frequently enough. When you stop taking risks, you stop failing and a lot of time your lack of failure can be your biggest demise. I have lots of stories about failing, but our biggest failures have led to our largest successes.
So, when you are thinking if you should spend less, consider spending more. Would the future be brighter?
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