You Can’t Cut Your Way To Growth

The possibility of a looming recession is bound to make every CEO nervous. But it’s a particularly sensitive time for a particular kind of leader: those at the helm of growing companies anxious about a softening economy.

The temptation is obvious: If you see dark clouds on the horizon, why not start cutting now in order to better ride out the storm? That’s certainly been the strategy for lots of big name companies contributing to what’s currently being called the white collar recession.

The problem is that prudent cost controls have a way of making things worse, not better. You can’t cut your way to growth, but you can leverage your strengths to get there.

Consider the service-to-sales dynamic, where traditional service roles are interwoven with sales functions. Crucially, this allows support to operate as a profit-and-value center, instead of just being a last resort for customers and a drag on profits. There’s often a lot of expense in service and a lot of pressure to cut when times get tough.

What’s lost in this thinking is the opportunity that also exists—to not just maintain service to sales, and potentially keep more of your customers, but to grow those customers as well.

Too often, when companies are dealing with customers or clients, the bulk of their time together is through a service center that, by definition, represents a point of demand failure. Something has sufficiently failed for the customer that they’re willing to call or reach out through the website.

Cutting that point of contact does nothing for that frustrated customer, except maybe make them even less satisfied with your product or service before they walk away (and potentially share their dissatisfaction with the world).

But retaining the model and leveraging it offers the possibility of the opposite outcome. Yes, it costs money to hire, train and support staff whose job it is to interact and solve the problem. Knowing that the problem exists is the point of leverage that would be lost without it.

The only way to preemptively resolve an issue is to be aware of it in the first place. The only way to know what you need to react to is to have data that points you in the right direction.

If you can begin to understand the trigger points for engagement, you can actually reach out and protect value with the customer, rather than sitting back and waiting for it to decline slowly and inevitably.

When your product or service fails, there is a distinct cost associated with just receiving that challenge and solving it. An abandonment of service to sales, or even a modest haircut in employee count, can reduce or eliminate the potential not only of finding a positive solution, but of shifting the entire model from cost to profit.

To be clear, these sorts of tough calls exist in every macro environment. Even when times are good, unfocused hiring can do nearly as much damage as the undisciplined layoffs that occur amid inevitable weakness.

No matter the environment, though, blindly cutting what on paper looks like a cost–but, with effort, could represent something more–will never be a recipe for growth.