Profit Building: Cutting Costs Without Cutting People

As one CEO said to me recently, "No one who has a conscience ever wants to lay anyone off." Yet the headlines are filled with announcements that companies are making massive cuts in jobs and employees. Recently, these cuts are even coming in the fastest growing technology industries. If people don't like to fire anyone and people don't like to be fired, why is this happening?Mr. Ludy argues that faced with missing budgets, the orders come down to spend less. Most people do know how to fire someone, so that option gets plenty of attention. Most people do not know many other ways to cut costs or boost profits in the short term, so the alternatives get little attention. Our firm did a study more than a decade ago that has been quoted in dozens of books and magazine articles. We found that the stocks of companies which did layoffs usually underperformed the stocks of companies that did not. By the end of four years, the differences were enormous in favor of those who did not do layoffs.Many people believe that this is because people do layoffs poorly, and many people do. But it also because the effort that goes into the layoffs could be better deployed in activities that increase profits. Usually, the bulk of those who go are the most employable people. They end up working for the competition, or having to be hired back as expensive consultants. How does either alternative help, while you are paying severance benefits as an additional cost?Mr. Ludy points out, based on his extensive experience, that most executives, managers, and supervisors know little about profit improving. Much of the recent training in companies has been on how to reduce errors, and that may help cut costs in main processes. That learning is often of little help in secondary processes and in areas where the processes need to be totally replaced, revised, or outsourced. Xerox and Motorola are both famed for their quality processes, and both companies are struggling now to make a profit. Mr. Ludy has developed a process described in the book that helps to get people focusing on the best opportunities, and following through to implement the opportunites that they select. He also provides lists of items which many companies ignore, to help get the process started.Although I have not seen this process working in practice, it is similar enough to elements of successful processes I have seen that is has credibility to me.If you decide to pursue this process, I suggest that you can improve upon it. First, rather than just having one small team working on this, you should try to get as many people working in small teams as possible. The most successful profit-improvement program I ever saw involved over 14,000 people in suggesting ideas. Second, be sure to compare the performance you are achieving in one part of the company with what you are achieving in another part of the company in the same activity. Most large companies get their best ideas from benchmarking to t

Perry Ludy has written a dramatic wake-up call for any manager responsible for bottom line results. In recent years we have learned how to improve most business processes significantly using work redesign, teams, quality and other tools. But few managers apply these proven approaches to profit building as a standalone process.From his own extensive experience managing both staff groups and a variety of line organizations, Ludy provides practical guidance for involving employees in focused cost reduction and profit building initiatives. He points us toward new stands of excellence for managing in this twenty-first century.

This book is easy to read. The message of how to achieve continuous profit improvement through cost reduction strategies is simple, yet powerful. The examples noted by the author help to crystallize how each step in the process can be successfully implemented while validating your record as an effective leader and innovative thinker. I believe there are many business leaders today who would benefit from reading this book.Ludy offers insight to some of the obstacles business leaders face today in developing effective strategic plans to help sustain long-term profitability. He presents the strategies with a humanistic view, recognizing that people come from different backgrounds and have unique thoughts about how to achieve the same goals. The book shows how everyone can make a valuable contribution to a company's bottom line.

As a corporate management communications and marketing consultant, my firm is often asked to help managers discuss cost cutting campaigns with their staff. Perry Ludy's book is the perfect primer to serve as the basis for such projects. While keeping the bottom line front and foremost, the premise of the book is employee involvement. Using the techniques in Profit Building, good management communications literally fall into place. I am ordering copies for two current client projects and will be looking for ways to weave it in to additional work.

Profits are essential to all business ventures and the author gives much practical advice on how to increase them without reducing the workforce. He relates his experiences in several companies that led him to formulate his Profit Building Process (PBP), a five-step process to evaluate and implement profitability and reduce costs. His most innovative idea is Questions Brainstorming. The notion is to brainstorm for questions about a topic, rather than solutions (solutions will come later). The book is very readable and is filled with practical suggestions on how to increase profitability. If profitability is important to your business (and what business does not have this concern), buy this book.