I don’t eat meat, having developed a sense that “I shouldn’t” as a spotty teenager with an emerging and sometimes confused sense of ethics and justice.
40 years later I am an avid questioner of “Salami Slicing” – that method that is rolled out whenever a cost reduction is needed, often in a number of thin slices over time which “don’t scare the horses”, or invoke a response from the unions. This method is often delivered with little distinction between important and critical value adding activity, and less important work.
The result often is that people doing important work are “let go” (another euphemism) and are then rehired on a contract basis to do THE VERY SAME WORK, often at the same desk they had emotionally vacated a few weeks earlier!
When asked by clients to help them reduce costs we believe it is really important to take three steps to make some clear distinctions and to deliver a more helpful outcome:
Firstly, get clear on your design principles for the cost reduction. How will you judge which activities need to be removed, and which to retain?
Secondly, work out how much needs to be delivered through fixed costs or variable costs. Of the fixed costs, what proportion needs to be removed from people costs?
Thirdly, review all the activity of the organisation or unit in question and run them through the following filter (RADASC) before getting clear on how many roles are needed and which staff to “let go”:
Remove or Reduce activities
What activity is no longer needed or can be reduced? e.g. can a monthly management accounts analysis be reduced to once every quarter?
Add activities
What new activities might be needed? Lower levels of support need to be supported by clear help, instructions and systems
De-duplicate activities
e.g. can recruitment be carried out at group level instead of by each division?
Automate activities
Which activities can be digitised e.g. can medical scan reviews be carried out by AI tools instead?
Self-serve offers
What service activities could be moved to a self-serve model? e.g. receptions offering a self-check-in facility
Combine activities
Which activities can be outsourced to others or combined with peers? e.g. can finance or estates activity be shared with partners e.g. hospital trusts could share with local authorities or even other hospital trusts?
It’s worth noting that cost reduction exercises — particularly those that remove roles without reviewing lateral coordination mechanisms — can damage the connective tissue of an organisation. Our article on designing cross-functional connections explores why this matters and what to put in place.
If you are interested in discussing how we at Metalogue could help you reduce costs optimally — without compromising the design of your organisation — find out more about our organisation design work or get in touch directly at contact@metalogue.co.uk.
Interested in our research on organisation design? Find it here.
References
1. Salami slicing was first termed by Hungarian Communist leader Mátyás Rákosi – https://tnsr.org/2021/11/salami-tactics-faits-accomplis-and-international-expansion-in-the-shadow-of-major-war/
