We Can Manage Enterprises Well Without Cutting Corners.

In recent economic crisis, one of the biggest mistakes committed by many enterprises is to lay off a lot of jobs to reduce costs.

Subsequent stock prices showed that the move was not welcomed by investors, and a large number of studies in the past ten years also showed that

In fact, some experts pointed out that the massive layoffs of some 1 million people in the past two years have impeded the significant recovery of the economy.

However, despite the constant warning, big companies from Amazon to YAHOO have issued dismissal notices.

They argue that mass layoffs are the only useful weapons they need to tackle major difficulties.

Is it true? Indeed, wage costs often account for a large part of the total cost of most enterprises.

However, there are many costs associated with mistakes, mistakes, accidents and external emergencies.

These costs are collectively referred to as "operational risks", and the amount is alarming. But if managed properly, they will not only significantly reduce corporate losses, but also will not produce any negative effects.

For example, agencies such as Mercer estimate that every year, businesses suffer more than $85 billion because of significant risks, such as employee accidents, office theft, etc.

In this way, it seems that American companies have been saving less than $40 billion a year over the past two years.

Therefore, even if we reduce these risks by half, we can achieve the same effect as layoffs, and there is no negative effect.

Of course, to reduce costs by managing operational risks, enterprises must change their mindset, formulate a more comprehensive strategy and change their mindset.

They must abandon the static, product based (or defined) concept of cost, and set up a more humanized, dynamic, variable (or uncertain) cost concept, recognizing that layoffs are a loss value and the most undesirable means.

They also need to establish mechanisms and indicators for assessing and measuring operating costs.

Most large enterprises are lucky because they have carried out operational risks in some areas.

Despite the difficulties, enterprises can still do that.

Enterprise managers can make a comparison between the strategy of downsizing and the strategy of reducing operational risk cost through the following three rough steps.

Define operational risks and start collecting data.

Define the next standard for operational risks in various business areas (e.g., errors related to employees, processes, systems, external events, etc.).

If this scope is too large, we can conduct a pilot study with a representative main business unit.

If this is not the case, choose a major loss type (such as workplace accident), and then calculate the cost incurred by the company within a certain period of time, such as a month, a quarter or a year.

Although not every event has data record (or influence), it is enough to collect data as long as there is data record.

Establish and evaluate indicators.

For statistical considerations, the simplest measure is a scorecard similar to SWOT, which "scores" losses from two dimensions, namely the probability and cost of occurrence.

Based on the scores and discussions with business experts, you can determine which losses are low (probability of occurrence) - low (cost), medium, medium, high, high or other combinations.

Your goal is to figure out how to use some control and management measures to pform the event of high - and high - high events into low -, middle, low - low events, and to estimate the cost of doing so.

Relatively lower

There is no denying that for some enterprises, especially for many new ventures, the cost of operation risk is much lower than the cost of wages.

However, for many other enterprises, a more comprehensive management of operational risk is not only more feasible than layoffs, but also a more reasonable and humane way to reduce the loss of enterprises.