Few Words for the Companies

Companies struggling with economic crises due to loss of business tend to cut the budget of cost centers. This includes operations and HR. Adjusting the capacity based on the demand is acceptable. However, from my observations finance institutes tend to cut more than adequate from their operations department. They keep spending on marketing and sales. Service sector generates value to their customer by the services they provide; this includes the operations as well. By lowering the budget of the operations, the head count would decrease and higher paid experienced employees would be replaced by cheap unqualified personal. This results in operational problems for the customer which reduces the companies added value. Some of the customers would leave and the remaining would only pay lower prices for the reduced service quality. This is a dead-end spiral. Spending millions on marketing and sales don’t solve such problems.

In service sector, if a business wants to stay in business, it has to keep its quality of service to a certain minimum. This can be achieved by experienced employees on the service side that are paid properly. Service side includes the operations obviously. Cost reduction can be achieved by automation. However, cutting budget from the inevitable manual work results in down spiral.

Additionally, the current employees of the company create value to the customer.  Employee selection and management is the most critical part of a company. Incompetent HR department due to budget cuts would change the employee profile of the company. Which results in a chaos for everyone within the company and the bad end would be inevitable.

The companies need to readjust their way of looking at their business. Cost centers vs revenue centers are a simple way of looking at the big picture. This narrow-minded approach results in big monetary losses and large firing moves by the companies. The big picture can be seen by looking at the value chain. As long as you create value to the customer you can make money.