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CEOs are looking to cut staff, but the old 'slash and burn' isn't going to work

Photo: Getty Images.

Each year as the tennis elite battle it out on the court at the Australian Open, I simply marvel at how much the game has changed.

To be successful, elite players now spend as much time in the gym as they do practising on the court. They are stronger, faster, and make fewer errors. Their training is refined and based on the latest science.

The bar keeps rising every year.

While a player might hope to win in three sets, they have to be geared, and fit, for five – and confident enough to be bold with their game plan, to win. And to win a major, they must also eliminate the weaker aspects of their game.

Much like the changes on the tennis court, the environment for Australian businesses and governments has, and is still, undergoing significant change.

And with nervousness about global growth, and managing the geopolitical, technological and taxation environment buffeting our organisations, uncertainty and hesitation is setting in.

The confidence of Australian CEOs is slipping. PwC’s Global CEO survey shows CEOs are less optimistic about revenue growth this year (35% very confident and 47% somewhat confident) compared to last (43% on both counts last year).

But along with this, there’s something else in the air. The number of CEOs expecting to reduce headcount (41%) has more than tripled in 12 months (12% last year), with more than seven in 10 saying cost reduction is a high priority.

Whether or not this evidences our two-speed economy at play, in any company facing change, the way you approach the game hugely influences whether or not you get a win.

Australian CEOs balancing the need for cost management against the need for growth are on a precarious path.

If their plan is too focused on the short game – they risk alienating staff, damaging culture and inhibiting the very growth they seek to achieve. If their plan is too focused on the long game, they risk alienating financial markets and the confidence of their board and other important stakeholders.

So, the moral in the tale of uncertainty is to look at both the short and long game in order to be fit through times of challenge:

  • Communicate and reinforce a long-term narrative, based on purpose, vision and a strategic set of goals
  • Be bold in first choosing, then pursuing new growth areas within existing and new addressable markets. While requiring investment, these could reap what they’re worth 100 times over if they remain on the table
  • Reduce, eliminate, automate or outsource those areas of the organisation that have built-up in the ‘good times’ or provide no clear differentiated capability

Cost reduction is an age-old strategy; one that will always have a place in a CEO’s kit bag.

But to make it work, the old school ‘slash and burn’ must make way for a more sophisticated approach. Get an elite team around you, and be prepared to be agile with your game plan, and it will be game, set, match.

Neil Plumridge is Managing Partner of PwC Consulting Australia. With a two-decade management consultancy background, Neil has helped countless clients improve business performance and productivity.

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