4 Business Expenses You Should Never Cut When Optimizing Your Costs

4 Business Expenses You Should Never Cut When Optimizing Your Costs

During challenging times, most organizations are pressured to identify and trim extra expenses as a way of increasing profit margins. The thinking goes that making tough choices today has the potential to encourage greater flexibility and resilience tomorrow. Though leaner organizations are often better equipped to weather crises, making excessive cuts to the wrong activities or programs can hinder growth and adaptability.

How do you achieve business cost optimization without trimming too close to the nail? Start by determining which cuts are off limits. During my recent participation in a TechServe Alliance panel, we identified these four items as expenses you should never eliminate. So, if they’ve been on your mind, it’s time you think again.

1.) Compensation Models

With the larger percent of operational expenses dedicated to labor costs (some estimate as much as 70%), it’s tempting to reevaluate compensation models during an economic crunch. During the early days of the coronavirus, some organizations even experimented with top-down pay cuts to avoid massive layoffs. Though the willingness of the team to make sacrifices is admirable, this approach can be shortsighted.

Let’s use COVID-19 as an example. The persistence of the virus in our lives surpassed many initial estimates. As a result, the compensation reduction some organizations adopted wasn’t enough to prevent downsizing. That’s clear from the 8,300 jobs that disappeared from the IT job market in November after a several month rebound.

If external pressures last for longer than anticipated, top performers might decide to relocate in the hopes of recuperating any lost compensation. Even in times of duress, some companies are willing to pay top dollar when it comes to retaining or acquiring top IT consultants.

2.) Recognition Programs

Another area some businesses might be tempted to cut is budgets for recognition programs. During years when discretionary funds dry up, it might be difficult to justify expenses outside of the bare essentials. Still, employee recognition programs are a valuable morale booster that can sustain your employees through tough times.

Our consultant care programs are a great example. Though some organizations might have downsized their Christmas party this year, we continued to throw it with the usual panache (albeit virtually). Plus, we still arranged our Integrity Excellence Award trip to convey to our top IT consultants (and their significant others) the impact that their contributions have on our business. Events like these demonstrate how we value and respect their work, providing ample justification for our people to stay with Capstone IT during any lean years.

3.) Vetting & Onboarding Processes

Long hiring processes manage to elevate recruitment costs and threaten the loss of top talent. In fact, competitive organizations identify ideal candidates and move fast to bring exceptional people aboard. Rather than cutting essential vetting and onboarding activities from the hiring process, your business is better served by refining your current verification tactics or even outsourcing to the right partner.

For example, Capstone IT’s technical screening process incorporates a third-party system and the knowledge of internal SMEs to authenticate technical skillsets and credentials. We’ve refined these tactics over hundreds of placements to complete checks in an orderly fashion.

Plus, our recruiters and consultant care team ensure that the transition of new talent onto your team goes off without a hitch and reduces the chance of last-minute candidate falloff. This allows you to flag the rare instance of candidate fraud, secure the right people, and still reduce your spend on technical tests and verification checks.

4.) Essential Hiring Staff

Growth cannot happen without the right people in your corner. In lean times, many organizations opt to forgo hiring and rely on existing staff to carry the weight until there’s a market or profit resurgence. Again, there are limitations to how long this strategy will work.

Morale can quickly erode and the scalability of your business can drag without enough people to propel innovation forward. That’s why, even during challenging situations, your business should not completely freeze out hiring.

For starters, there should always be a budget for people in essential positions, whether they contribute to your core competency or any systems that elevate those competencies. Otherwise, you might not be able to surmount problems as they arise, stunting your overall business growth. In our own situation, we recognize growing our sales team now is vital to reaching the next revenue plateau and expanding into new geographic region. We’ll commit to hiring top talent today to elevate our fortunes in the future.

For IT initiatives or projects that are not core competencies but are still necessary, your organization can reduce costs by engaging temporary IT consultants to accelerate your outcomes. Many of the typical compensation costs are disassociated from your business in this arrangement, so you can leverage the skills without paying for full employment obligations.

Can Retaining Budget in the Right Place Cut Costs?

Often, when our customers are searching for opportunities to reduce their operating expenses, few of them would think that making an active investment would do the trick. But the right application development, digital transformation, cloud solutions, or DevOps project can help with business cost optimization and even expand your profits. Your business just needs to know where to start – and who to hire. 

The right IT consultants can maximize your output and simplify your business cost optimization. Learn more about how our IT staffing solutions can help to streamline your hiring costs.

 

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