Cost Cutting – Bad Idea

The economy is down and probably headed lower. So why in the world would you want to cut costs? That is a serious question.

The staff is smart. They have always been careful. Just how much can you save by cutting costs? How much time will you have to invest to find ways to save? What will the impact of the savings be on the operation? If you eliminate the donuts from the break room, will you save enough to offset the low morale as the staff worries about layoffs? Can you actually save enough to justify the cost of finding the savings, lower morale, and distraction from increasing income? Can you actually save enough to make a difference or is it just that doing something makes you feel good?

The fact is that the costs have never mattered as long as there has been income. Put another way all you really need is income. So why cut costs when you could just raise income or do the things necessary to prevent a loss of income?

Consider this example. A social service agency provides non-medical support to its clients. The clients all have a serious medical condition that needs skilled medical care of many kinds. The agency only provides non-medical services such as counseling, support groups, non-medical supplies, nutritional supplements, transportation, etc. The agency is free to all patients. It operates solely on donations or at least it use to.

During a downturn in its local economy, it saw a drop in donations. Its options were to cut costs or increase income and donations. They decided to find a way to increase income and donations.

One of the expectations is that hospitals will provide social services to their clients. A local hospital wanted to increase it social service activity. The agency offered to provide social service for incoming patients who also met the profile of the agency’s patients. It is something the agency was already doing just not during the intake process at the hospital. As a result, the agency can use existing skills. The hospital agreed to provide workspace and pay a fee for the services.

The net is that the hospital was able to meet a need it had. The agency was able to generate income from a new source. The agency was able to capture the patient earlier in the cycle. A strong partnership exists between two non-competing organizations. The client has more continuity of service over a broader spectrum. More patients receive the services they need.

The increase in clients serviced was partly supported by the hospital’s payment for the agency services. In addition, the donors saw the growth in demand and found ways to respond to the need. The agency thrived during a period of difficulty for other agencies in the area.

The partnership allowed the agency to grow during a tough economic time. In fact, the agency is much stronger today because of the partnership. It is able to handle the present downturn. It is also looking for new ways to increase income during this downturn.

If you grow your way out of a recession, you come out stronger while your competitors and other agencies emerge weaker.

You must offer new or expanded services to the community. This will work for your mission regardless. What can you change that will benefit your clients and attract new clients? This is the time to capture market share while others are cutting costs.

Is it better to spend your time finding ways to cut costs or spend that same time finding ways to serve your clients, attract new clients, and increase income?

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