6 Ways to Prepare for Inevitable Cost CutsBy Ericka Chickowski | Posted 2008-03-03 Print
Gartner gives some well-thought out advice on how to plan for demands on cost-cutting that will more than likely be coming from the top of your organization this year.
As many economic indicators point to a sluggish 2008, analysts are warning IT executives to get ready for the potential demand for cost-cutting measures to cascade from the board room. Recently, IT research-firm Gartner sounded the alarm, advising IT managers to prepare for executive requests for diminished expenditures by planning proactively.
“We want to be clear, we are not recommending that organizations go forth and cut costs in IT,” said Ken McGee, vice-president and Gartner Fellow. “We are recommending that in anticipation that this may be an initiative—and a very urgent initiative—in 2008, prepare a team for cost cutting and have your strategy ready in your hip pocket so that you can deploy and start finding costs to be cut within 24 hours of being asked to do so by executives.”
In order to do this McGee and his fellow analysts at Gartner are recommending the following six-step cost cutting plan:
1. Don’t Wait for the Cost-Cutting Mandate from Management
Gartner recommends companies assemble a cost-cutting team immediately to proactively address ways the organization can trim expenses when word comes down from the mountain to do so.
“The way recession work is there is an enormous lag between the actual recessionary behavior of people and businesses and the time when a recession is formally announced,” McGee said. “For example, in 2001 the recession began in March of 2001 but its not announced until November 2001. So by the time management gets around to looking at earnings or anything like that you are well into the recession already and the last thing you need to do is commence planning at the time management says to go cut That's going to waste more time."
2. Choose the Best and Brightest IT People for the Team
The cost-cutting team should be comprised of the organization’s smartest thinkers, which is why Gartner advises organizations to reassign these people to the team and temporarily suspend their other day-to-day tasks while they tackle budget priorities. These team-members’ financial bonuses should be tied directly to how much the team saves this year.
“Often times companies tend to put lesser performing individuals on these types of task force, and we're saying either it’s a top priority or it isn't,” McGee said. “If it is a top priority, then use the best and brightest. They will get you there fastest, they will understand where the best opportunities are and they will save you a lot of time.”
3. Do Not Allow Finger-Pointing or Second Guessing
Similarly, don’t waste time pulling the trigger on a cost-cutting target due to needless recriminations. McGee warns team members that they’ll never get cooperation from people if they storm in and act like Monday-morning quarterbacks.
“When you're engaged in this kind of triage activity, and you need the input of people in order to identify what could be a good candidate for cost-cutting, the last thing you want to do is to have people going around saying, ‘Oh my God, look at this application, who the heck decided to do that?'” he said. “Go in there just assuming that whatever was done in the past was the right thing to do and absolutely refrain from passing any judgment on decisions made in the past.”
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