Friday, December 3, 2010

Cost Cutting Your Talent?

There is an article in Cinco Días published today, where John M. Scott, president of KPMG Spain talks about cost cutting and possible implications it might have on the competitive advantage of an organization. "Reducing costs cannot be cutting talent," says Scott and there is little disagreement with him. There are multiple publications about cost reduction in times when bottom lines don´t look particularly rosy, and undoubtedly getting rid of headcount is the easiest way to push the fixed costs down. However, there are many examples when companies were able to stay close to their proclamations of "people are our greatest asset" without actually divesting of that very asset at the first sight of an approaching storm. Southwestern Airlines is one of the best example, I think, and there are many others that would explore a multitude of other opportunities before they say  good-bye to their staff.

Following Scott in his speech, he claims that this "passivity" of not being able to overcome tough economic problems by other means than letting go of people is "losing the opportunity to face the future". In fact, what will the companies do when the markets pick up? Recruit again? Well, as an old Latin proverb goes, Even a healed wound leaves a scar (free translation of vulnus sanatum est, cicatrix manet :)

What will happen if you "divest of your most valuable asset" and your competitors will not? In any business school you will hear that the only true competitive advantage is your people. Cannot agree more - look at the heading of my blog. Still, I guess we have seen too many people lose their jobs this last crisis. Oops, sorry, I am not supposed to say the word "crisis"... financial downturn! or yet better - economic slowdown.

But - there is a worrying thing that Mr Scott is saying, "I have not seen in Europe the willingness, the ambition that is there among the youngsters of India for the past at least ten years". So, the developing world is eagerly looking towards the West, wishing for nothing else but for jobs to be cut, because we all know where those jobs will be migrating. I do not wish to go into the issues of outsourcing here, but the point is clear: by letting your people go, you are letting go of your business, and most likely... it is not coming back.

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