The missing element of cost transformation: your People

The human aspects of a cost transformation programme are notoriously difficult to manage. Any cost programme brings uncertainty to people across the organisation. Understandably, individuals become worried about their roles, remits, and even their future livelihoods. As human beings, we’re wired to regard change as a threat: the prospect of cost-cutting and scale backs can undermine psychological safety, triggering a ‘fight or flight’ response which leads to people directly resisting the change, being apathetic and unproductive as a consequence, and even opting to leave the organisation.

You might be cutting cost in the short term but unknowingly creating a downward productivity spiral that more often than not leads to a longer-term dysfunctional culture of protective behaviours that undermine innovation and growth.

It doesn’t have to be this way. The issues can be tackled with a combination of clear thinking and courage that will help the organisation preserve value and retain key talent, emerging stronger on the other side.

In our experience, organisations that use cost transformation as a platform to long-term value creation and growth do five things really well:

It starts at the top. For CEOs, think about how you are going to inspire and motivate people for the journey ahead, capturing hearts and minds. What is the fundamental purpose of the organisation, how can you protect its legacy and create a path into the future?

It’s vital to bring the leadership team together, as a united front, and articulate the vision as a collective and a coalition. Everybody at a leadership level must buy into this and give their absolute commitment. We run immersive workshop sessions at our ‘Ignition Centre’ for leadership and HR teams to help do this, and they are always very powerful events. In these, we guide leadership teams through the cost transformation roadmap, the issues they will face and coach them to dial up the leadership behaviours that will be needed – transparency, courage, resilience, humility, empathy.

Leaders walk out energised, motivated and clear about what’s required. They are ready to ‘dare to care’ – which means completely embracing the situation, engaging with teams and communicating the changes, on the road, on the shop floor, in one to one meetings – whatever it takes. Leaders face into these difficult messages and meetings with courage and transparency, building trust and connection and, by doing so, the resilience of their teams.

You’ve got to have a really clear understanding of the change that is going to occur – and what it means for people and teams across the business. The involvement of HR from the outset will be critical to so this – they will need to work side by side with leadership to look at the potential impact on roles, the employee engagement strategy (especially in a trade union environment) and talent retention.

Different areas will be impacted in different ways – so what are the implications for them and how can you best engage them? How can you involve them in the change so that rather than being done ‘to’ them, there is as much co-creation as possible which will build far greater engagement? This is especially critical with trade unions – getting them involved early and working with them is absolutely key.

Remember too that in most cases, headcount reduction (if that is on the table) will only affect a minority of staff. Clearly, that minority will need all appropriate support. But for the majority, the changes could bring new opportunity – so how will you bring that out and make sure that negative aspects don’t become disproportionately focused on?

You’re dealing with deeply personal issues and emotions – so you have to take a human-centred approach. Naturally, people want to know what the change means for them. We encourage businesses to take a persona-based approach, which is about recognising the different stakeholder groups and cohorts across the organisation, and what the triggers and priorities are likely to be for each one. For example, the perspective of a middle-management engineer who has been at the company for 20 years will be very different to someone new into the business early in their career. The persona approach helps you build a tailored change and engagement journey that really speaks to what people care about, recognising the factors that motivate them – for some personas such as middle management, it’s about involving and consulting them, making use of their experience and expertise, showing that it’s truly valued, while for other personas such as those early in their careers what may be more critical is to make things clear for them and keep them feeling connected and reassured.

It’s also key to recognise the mix of factors that motivate and matter to people – which is usually a blend of what we can describe as intrinsic and extrinsic factors. Intrinsic elements include what makes people want to work at your business, what they really value about their roles, the feelings of respect or loyalty they have towards their boss, the bonds they feel with the people they work with. Extrinsic factors include areas such as remuneration, bonuses, career development, upskilling and training. It’s when these two sides are both positive for people that they will feel most motivated and able to buy into change.

It’s often said, but it’s especially true here – good communication is fundamental. Communication brings clarity and increases understanding, which helps dispel fear. It brings to life what the programme actually means for people and what part they have to play. It frames the journey and keeps people orientated as to where they are. In some of the best transformations we have seen, a strong and compelling communication strategy has been a stand-out feature.

It’s vital to ensure you have the right mechanisms in place to embed and sustain the cost savings and value created on a long-term basis. This is partly about technical capabilities and mechanisms – cost analysis, organisational baselining, benefits tracking – but it’s also about the people skills and behaviours for sustainable transformation. Leaders and line managers need to build the resilience, stamina and enthusiasm to set the tone for the future and help build the skills and capabilities in their teams that contribute to long-term success.

You want to bring about necessary change, minimising negative impacts and inspiring people for the next chapter. Our goal is to equip a business to do this, creating a drumbeat and providing a laser-sharp focus on where to channel efforts to create the best, people-centric results. Ultimately, this is about people not numbers, after all. It can be challenging, it can bring difficult moments with it – but ultimately there is a way of ensuring you bring people with you, energised for the new world.