When times get tough, the native human instinct is to retreat to rudimentary levels of behaviour and protect one’s basic individual needs.
When a single person is threatened, the natural reaction is to protect their own access to necessities such as food, shelter and warmth, as a degree of autonomy takes over. For commercial organisations, keeping afloat and retaining customers takes priority when hard times hit, as businesses look to immediate methods of cutting costs and improving efficiency.
There are two typical approaches to dealing with a recessionary financial climate, with organisations either adopting a long- or short-term focused attitude. For some, there is a reluctance to immediately change or adapt to their economic environment, maintaining a cross-departmental tactic when it comes to business operations.
The Long-term focus
The organisation continues to operate as a single unit, with all decisions and objectives remaining applicable to every section of the business with a view to maintaining business coherence and objectives in the long-term.
There can be many benefits to a long-term approach, as these organisations ensure operations are consistent throughout the business, retaining the links between departments, as every sector works towards the same business goals.
When it comes to implementing potentially cost-saving technologies, the large-scale mentality can be an advantage, as return on investment (ROI) is often most easily quantified when a tool is adopted across an entire organisation, rather than by a single department.
Initiatives such as Software Asset Management (SAM) tools are a perfect example of this, as the ability to have complete visibility of software licenses across the whole company allows the IT department and executives to see where licenses are going unused and can be redistributed or cancelled to save money.
This also ensures the company has the correct number of licenses compared to its use of software, protecting the business from a potentially damaging fine. These savings are most evident when the technology is implemented across the company rather than in a single department.
Acting for the short-term
However, the solely long-term view inevitably has its drawbacks, as it refuses departments the right to act autonomously to implement cost-cutting activities which could be highly beneficial on a small scale but would not work across the whole company.
Large-scale implementations can be expensive and often slow and complex to roll out, leading to a slower ROI. Often, multiple smaller scale solutions can lead to a bigger cost saving in total.
When economic conditions are uncertain, flexibility is essential in ensuring a business is able to adapt with its environment to keep costs down and efficiency high in the short-term.
Increasingly, however, businesses are adopting this second method to survive the recession, by allowing departments to become independent from the main hub of the business, and acting almost as individual organisations.
With increasing pressure to reduce outgoings and heightened levels of accountability, departments are forced to operate more leanly, to increase the speed with which they can implement small-scale cost-cutting measures.
This echoes the human instinct to act independently and ‘look out for number one’, as sections of the organisation split off to solve their individual expenditure problems.
This flexibility can be a huge asset to businesses, as it allows the individual business units to save money and improve productivity in the most appropriate way, implementing short-term tactics which offer benefits to the department which would not necessarily translate across the whole of the organisation.
By allowing units to act as individual silos with a centralised base creates the optimum scope for immediate cost savings, as everyone works to their individual agenda, using the most suitable tools available.
For the IT department, for example, implementing technologies such as Voice over Internet Protocol (VoIP) can be hugely beneficial, particularly for the helpdesk, saving technicians’ time and improving the efficiency of the IT services team by automating customer responses.
This type of technology would only be relevant to the IT department, thus it makes sense to give individual departments the flexibility to choose the tools which work for them.
Yet, of course, there is again a negative element to this approach which is not always immediately apparent. While businesses can generate rapid cost reductions straight away, this short-term mentality can leave the business fragmented and disconnected when the hard times begin to lift.
Departments working towards individual goals can cause businesses to miss opportunities to make greater savings and make it hard to return to long-term widespread planning when the gloom disappears.
When budgets begin to ease again, implementing tools across the organisation as a whole to generate long-term benefits becomes a difficult task and reuniting people, processes and technology on a broad level can be tricky.
Finding the right approach for the current climate
Each approach has both positive and negative elements, and inevitably the most successful organisations will be the ones which adopt the positive aspects of both. To survive, and even flourish, in a recession, businesses need to ensure they do not focus entirely on the short-term, but must retain a long-term strategic vision of business objectives.
When investing in technology, business-wide but cost-effective implementations should be considered, as these can offer the best ROI and create a permanent base of efficiency from which to work.
Organisations should not be afraid of making enterprise-wide purchases, but should consciously look for solutions that avoid the huge initial expense and complications of implementation which can often come hand in hand with these.
However, short-term solutions are also necessary, as budgets will predictably be tightened, and cost cutting ventures can be exercised by individual departments to save money where appropriate.
Companies need to adopt a more flexible attitude to implementation, looking to tools that might typically be considered ‘mid-market’ to deliver the immediate savings required. Solutions designed for smaller-scale roll outs are more scalable than ever and can be used as effectively by large companies as by smaller businesses, retaining their core appeal of being quick to deploy and able to deliver fast ROI.
By taking advantage of the positive sides of both large and small-scale purchases, organisations can ensure they are addressing the immediate need for cost savings without sacrificing the long-term goals of the organisation. The key is to take action in the short-term but to keep your eyes focused on the big picture, strategically planning for a future beyond the economic downturn.
Michael McCloskey is Chief Executive Officer of FrontRange Solutions, a leading supplier of IT Service Management and Infrastructure Management software.