I recently read about Elon Musk’s declaration of cutting spending at Tesla and it got me to think about how cost-reduction is often thought as elimination or reduction of purchases or services.
While I am not suggesting that Tesla is not in need of aggressive reduction or elimination, we can all agree that layoffs and too much reduction in purchased products cause tremors throughout the organization. I have seen and worked with enough companies that start lay-offs and the remaining staff start looking for positions outside the company or have increased stress leading to irritability and distrust between co-workers.
So, if cost-deduction is not just reduction or elimination of purchases and services, what is it?
It can be reducing the price tag of those purchases and services. Many times, this is quicker and has a longer lasting impact than any reduction in staff, not to mention these solutions are far less traumatic for your employees. In addition, some products and services are not easily reduced or able to be eliminated. This is where reducing the cost can be more far reaching than reducing some services.
Again, I am not suggesting Telsa’s problems would be solved with solely reducing the price, but it should certainly be a tool in their bag in conjunction with their other cost-reduction efforts.
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