In the face of economic recession, we have seen most companies adopting drastic headcount reductions.  This may improve financials in the short term; however, our experience has shown that companies need to think strategically since headcount reductions are not sustainable over a long period of time.  We have observed the amount of work required from an organization does not reduce proportionately with revenue reduction – especially when the revenue reduction is  driven by price reductions (and not volume and or transaction reduction) in the market.

With sustained higher levels of effort required from a reduced set of employees, companies are starting to observe lower morale and employee turnover.  This problem will accentuate as the economy starts to show signs of recovery.  This could quickly translate to lower customer satisfaction, poor quality of product/service, slower pace of innovation and an increase in employee turnover – all of which impact future revenue growth.  At first glance, these symptoms may appear to be isolated HR related problems; however these issues are possibly systemic, a byproduct of a more challenging/ complicated work environment.

Historically, companies have generally pursued one or both of the below approaches:

• Outsourced non-strategic processes and functions as a way to reduce costs and avoid increasing headcount.  However,  outsourcing typically cannot address core areas, such as R&D, marketing, and leadership - where many companies are currently struggling.
• Increased employee compensation and benefits to improve morale and retention.  While additional pay is helpful in the short term, it fails to address the underlying work environment issues, making this tactic become less effective over time.

Alternative approaches are available to sustain revenue performance without burning out employees or unnecessarily increasing payroll expenses.  Three S Consulting is currently helping companies develop strategies to improve productivity/output from core functions without increasing employee workload/costs – while improving morale and productivity.  We believe one of the keys to accomplishing this is to form unique,  symbiotic relationships with selected companies able to supplement and augment our clients’ capabilities.