Cuts: Is there a better approach? Pietro Micheli Steve Macaulay However we dress it up, the issue on many managers’ lips at the moment, and in society generally, is the issue of cuts. Now joining me in the studio today is Dr Pietro Micheli. Now, Pietro you have got many years’ experience of looking at organisations both in the public sector and the private sector, and how they perform. What is your take on the current situation? Pietro Micheli Well the situation is very difficult; and I agree with you, that is what we keep hearing from both business and the public sector, that cuts are inevitable. But I would like to challenge that a little. And the challenge is not to say that cuts should not happen, but rather when we talk about cuts, we need to think about where these cuts are going to happen and how they are going to be made. And this is the key question for managers. Steve Macaulay So the key question managers need to address is the how; how you go about it? Pietro Micheli That’s right. Steve Macaulay Now my perception is that most organisations feel the pinch, start to make the cuts and in some cases regret it? Pietro Micheli Oh yes, absolutely, because there is knee jerk reaction that we take often and we think that we should cut the number of people working at a certain function, but it’s almost like an instant reaction that we put in place, rather than really thinking about how is this going to fit with other strategies? How is this going to fit with our service and product offerings? What are we going to do that is different? Because that is the key question; if you cut then there is something that you need to do differently. And you would then do this the other way round, which is let’s start to think of what we want to do and then decide whether we are going to cut and how. Steve Macaulay Do you see a difference between the private sector and the public sector? Pietro Micheli There is a big difference, which is in the political agendas – they of course are much more important in the public sector and that is what everybody is of course concerned now in public sector organisations. So trying to understand what will happen in the Knowledge Interchange Online© Cranfield University September 2009 1 Dr Pietro Micheli
next few months and after the next general election. But other than this, most of the thinking, as I said, the strategic thinking will be similar. Because, again, the question is what do you want to do that is different? How do you want to improve the services that provide? How do you want to improve your products and at the same time try to reduce your costs? But there has to be a more comprehensive and holistic thinking; not just trying to think that by cutting the number of people this is going to solve your problems, because it won’t. Steve Macaulay What does that mean on the ground, then? I am conscious that somebody says cut so much off your budget and, in practice, although it is very nice to say think strategically and so on, a manager is often faced with taking some quite difficult decisions. Pietro Micheli Absolutely; that is certain and I don’t want to minimise this. But at the same time I think that we tend to think that cutting is inevitable and will happen across the board. In a sense, I don’t think that this is the right way to approach it. We should really try to think of, for example, how could we be better at what we do? There are a lot of instruments that we use, from scorecards to continuous improvement – the philosophy and the tools, the use of measures – there is a lot of knowledge around this. And I am worried that when times are difficult and tight like now, we tend to forget about all this and we just cut. Whereas that’s why we have worked so much and for so many years around performance management. Steve Macaulay So if you were to say to people don’t panic, look very carefully at what measures you are using, use those as a means to help improve the organisation, don’t destroy value? Pietro Micheli Absolutely. The first question is how are we creating value? So what is value for our stakeholders? That is question number one. Question number two is what are we going to do? And how do we make sure that we deliver this and that is again the task of performance measurement, performance management; and again, how do we improve over time? These are the key questions. By answering those questions, yes of course we might do some cuts, but that is the overall strategy that really matters and that is what I am worried about, that sometimes people tend to forget about it and when things start to go wrong we panic; and that is definitely not what we should be doing. Steve Macaulay Are there any other ways that managers can start to crack this problem? © Cranfield University October 2009 2 Dr Pietro Micheli
Pietro Micheli This is one of the key things that we have seen, for example in the forums that we run – we have a business round table and public sector round table – it’s really useful for people to compare experiences and for managers to talk to fellow managers and try and think that they are not alone. This is a problem common to everybody and there are different ways in which people have addressed this problem and this is really useful to compare experiences. Steve Macaulay So a key message that you would like to leave people with? Pietro Micheli I think that the key message is really try to think what is best for your company; what the organisation really delivers and what it does. That is what you really should think of. And then after that, reassess for example what are the functions that are really essential. And after that, again, try and think where cuts should be made. Steve Macaulay Pietro, thank you. For more information on Research Clubs click here
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