3 Top Business Combat Strategies
- Support Your Workforce When You Invest in Technology
- Cut Services and Products to Increase Productivity
- Implement Automation for Greater Visibility
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What this report covers:
As inflation careens out of control, talking heads, politicians, and business leaders seem resigned to the reality of a long-term recessionary period. How to hedge against inflation is the big question on everyone’s mind.
Everyone is feeling the pinch as the Consumer Price Index shows that prices continue to skyrocket. And in the Global Economic Prospects report released in June, the World Bank warns of a “protracted period of feeble growth and elevated inflation.” The World Bank is predicting that global economic expansion will drop from 5.7 percent in 2021 to 2.9 percent in 2022.
Now more than ever, business leaders must make choices that will guide their company through turbulent economic times. But it doesn’t have to be all doom and gloom as you consider how to protect your company from inflation. Those leaders who cultivate resilience during a struggling economy are well-positioned to thrive when the economy recovers. This opportunity to institute long-term change will position your company well – no matter the economy.
According to the Harvard Business Review, “Our analysis of the performance of 5,700 global companies found that those that cut costs to improve productivity the most during previous inflationary periods achieved higher total shareholder returns (TSR) — 27 percent was the median — than companies that took less action.”
Mitigate Inflation’s Impact and Recession-Proof Your Company Through Workforce Reforms
As you assess how to guard against inflation with labor and material price increases, two aspects of your business should be examined: spending and workforce.
More than just cutting costs, spending reforms should be based on implementing smart strategies and technology:
Workforce reforms must be well-informed and strategically planned:
- Invest in technology to increase your visibility into expenses for better strategic decision-making.
- Reduce your spending on IT, telecom, mobility, and utilities.
- Eliminate waste through the consolidation of platforms for more strategic decision-making based on real-time data across the organization.
- Implement automation to reduce your dependence on increasingly scarce employees who command higher salaries and packages.
- Access greater visibility into spending and then look for ways to cut costs by cutting services or product offerings. This will not only reduce workforce needs but will also allow employees to focus on the highest income-generating tasks.
How to hedge against inflation in these uncharted waters is the key question. And the answer is that businesses can still rely on proven solutions to give their business stability during these challenging times. Using proactive measures that support your workforce and utilize technology, your business can find stability during this unstable economic time.
1. Support Your Workforce When You Invest in Technology
With the current labor shortages, not only are we seeing wages increase, but companies are struggling to fill critical positions and retain employees. When it comes to your workforce, it’s not easy to determine how to hedge against inflation. Companies who blindly make across-the-board cuts to their workforce may find themselves struggling to retain the remaining employees due to low morale. It’s crucial that decisions are made to counteract higher costs, while still being able to attract and retain a qualified workforce.
The Harvard Business Review cautioned, “A natural tendency during these times is to apply a universal ax and order an across-the-board cut of salaries, expenditures, and headcount. … We strongly advise against such blunt actions. Instead, use a finer scalpel.”
But how do you do that? Automation is key. It reduces staffing costs as well as ensuring that key functions can continue, whether or not there is a worker shortage. Not only can automation cut costs to combat inflation, but it can also help overburdened workers get the help they need and increase their productivity.
The biggest benefit of automation is employee satisfaction. Without automation, the staff is often bogged down with mundane, repetitive tasks. No one enjoys paperwork, and tedious paperwork is a sure way to burn out staff. Staff who are able to focus on high-level tasks instead of mundane tasks are going to be happier in their jobs.
If you’re looking for how to hedge against inflation in staffing, one thing is certain: it’s important to retain employees. Hiring an employee requires staff time for interviewing, HR onboarding, and training. Employee retention is an important cost savings during inflationary times.
In her article How to Lose Your Best Employees, Executive Coach Whitney Johnson writes, “When your employees (and maybe even you, as their manager) aren’t allowed to grow, they begin to feel that they don’t matter. They feel like a cog in a wheel, easily swapped out. If you aren’t invested in them, they won’t be invested in you, and even if they don’t walk out the door, they will mentally check out.”
When you invest in technology and automation, you’re investing in your employees so they can develop creative and innovative solutions to the problems your business faces. This current environment requires it. Without automation, it’s likely that instead of bringing enthusiastic creativity to the table, your staff will be bogged down with mediocre tasks. Increasing productivity without increasing staff will have long-term benefits for your business. Whatever can be automated should be automated. You can’t afford not to.
Keeping your workforce from becoming overwhelmed is challenging in this current environment of labor shortages. That’s why it’s also important to identify those products or services that may be adding to the overwhelm with little payout. That’s why our next strategy is to increase productivity by identifying services or products to cut.
2. Cut Services and Products to Increase Productivity
Are there services or products that you can pull back from? Which of your services or products have a lower ROI (return on investment)?
The restaurant industry uses this strategy regularly, especially since it operates with a very low profit margin. Have you ever visited a restaurant only to find that something you usually order has been removed from the menu?
In 2020, Chick-Fil-A, well known for its commitment to efficiency, removed six items from its menu, including the side salad, breakfast sausage, and wraps. They also limited items like frozen drinks to only one size. But did it hurt their bottom line? The numbers tell the story. In 2019, they had $12.2 billion in revenue, which increased to $13.7 billion in 2020. That’s a 12.7 percent increase. And in 2021, Chick-Fil-A systemwide sales increased an additional 22 percent.
This case study is a great example of how to hedge against inflation. You don’t have to do everything to succeed. If a more customized product is creating significantly more work for your limited workforce, maybe it’s time to stop offering it. While you may disappoint some customers in the short term, the long-term benefits of increased efficiency will be worth it.
So the question is what is the equivalent of the spurned side salad in your business? Are there products or services that require a high investment of staff time or materials with very little payoff? If there are, consider eliminating that service or product and focusing on those products that have a higher profit margin.
If you don’t have the information you need to make decisions about products or services, it might be time to invest in an automated platform that gives you the information you need. It can be challenging to identify those areas that could be streamlined without clear visibility into your business operations. That’s why our next strategy is automation.
3. Implement Automation for Greater Visibility
Andrew Carnegie once said, “Watch the costs and the profits will take care of themselves.” Most business leaders would agree with this sage advice. But the reality for many businesses today is that the complexity of their business makes it extremely difficult to “watch the costs.”
Most businesses are struggling to manage telecom, IT, mobility, and utilities, given the sheer number of invoices and users of these services within their organization. Various services or vendors that are overseen by a variety of people and platforms can create confusion and obscure the real picture.
If you can’t understand your true costs, you will have no idea how to hedge against inflation in the area of spending.
Have you ever visited a home that’s had several additions over the years? Created without a master plan those homes often have oddly-shaped hallways and uneven flooring. In the same way, when a company grows, it may have added on services as departments grew or locations were added, creating a hodgepodge of invoices and vendors. Often this spending is managed and overseen by a variety of leaders at various levels within the organization.
To weather the economic storm of inflation, business leaders must have visibility into operations so they can identify ways to streamline and simplify, which is key to reducing costs. How to hedge against inflation? Automation is the answer.
Automation is extremely effective in three key areas that require daily management. They include tasks around invoice maagement, inventory management, and mobility management. Pairing automation with other cost reduction initiatives can result in significant savings for the enterprise. Kindred Healthcare realized over $12 million in savings due to increased visibility into their expense management system.
With automated systems that rely on AI (artificial intelligence), business leaders can access real-time visibility into spending and inventory. They also have greater insights as they make decisions about streamlining and cutting costs. These systems can consolidate all invoices and vendors into one system to give company leaders a clear understanding of the big picture.
Automated systems will:
- Save time by reducing processing time for tasks like invoicing. Bill processing automation provides eliminates hours of manually processing hundreds or thousands of invoices and proactively audits each invoice while paying only the accurate amount for the services used.
- Prevent errors associated with manual entries. Overpaying, paying for unused services, or late fees can all be avoided when automation tracks and provides visibility into these functions.
- Provide real-time insights into spending giving you insights into areas that could be streamlined.
According to Alex Abdelnour, a partner at McKinsey & Company, “With such rare inflation, there’s no business as usual. Every change made has to be monitored and evaluated closely and adjusted quickly if needed. It’s like a military control room—watching as the situation unfolds and making fast decisions.”
Your Long-Term Success Depends on Smart Enterprise Strategies
It comes down to a basic one basic question. Are you prepared to implement enterprise strategies that will enable your business’s stability and future?
According to the Harvard Business Review, “As [companies] prepare for higher inflation in this new environment, companies will need to make moves that not only cut costs but also build more scalable growth platforms, positioning them to strategically reinvest in programs that deliver greater resilience and stronger purchasing and pricing capabilities.”
We’ve discussed some options for more visibility into your business operations and how that visibility can drive decision-making. Whether you choose to streamline product offerings, use automation to get a clear picture of spending, or use technology to empower your staff, your business will find greater stability and success in the long term.
Social Posts:
- Now more than ever, business leaders must make choices that will guide their company through turbulent economic times. Read our latest white paper for strategies as you consider how to hedge against inflation.
- How to hedge against inflation in these uncharted waters is the key question. And the answer is that using proactive measures that support your workforce and utilize technology, your business can find stability during this unstable economic time. Read more here.
- Those leaders who cultivate resilience during a struggling economy are well-positioned to thrive when the economy recovers. This opportunity to institute long-term change will position your company well – no matter the economy. Learn strategies to hedge against inflation here.
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