Cost cutting impact.

Business week has a very good article on what might impact of unnecessary cost cutting initiatives. It sites three examples, Home Depot, Dell and NorthWest Airlines.

The biggest hit of such cost cutting initiative would be on customers, the article says. It gives the example of Home Depot where the cost cutting initiative led in to unsatisfied customer, there by reducing the income. It also says, Dell tried to cut its cost which only impacted the sales, off course the article admires the way in which these two companies tried to bounce back after learning from this episode.
I have some experience to share; I closely observed a cost cutting initiative in one of the Indian company. It only decreased the employee motivation. There were so many necessary things discontinued, which made employee think, actually this company is not doing well, so they started thinking other way.

Off course, CEO of this small firm was right in giving the directions as ‘cut cost as and when ever possible, how ever don’t compromise with basic quality of life in company’. This was transferred to lower brass in much twisted way and every division head jumped in to this initiative to cut more cost. Thus, resulting in decreased motivation among employee.