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Key Takeaway: When your machine shop is not performing at the level you need, it is time to take stock of where you are at. Here are some things you can do to help improve performance.
Note: Part 1 was published two weeks ago. If you haven’t already read part 1, we recommend that you invest 5 minutes and read that post.
Cutting Variable Costs
Some would say there is always room to cut marketing. Some say the place to cut is training. Personally, I am not a fan of cutting either. Both should be critical in improving company and individual performance.
Personally, I always try to leave the marketing budget alone. I never put any fat in the marketing budget. So any cuts would be muscle and bone. That is the last thing you want to cut. Your machine shop is yours and you know best.
My marketing efforts have usually relied on low-cost initiatives. Email marketing doesn’t cost much. Blog posts don’t cost much if you do them yourself. Social media posts are free. The point is, if you are going to invest in marketing whether the economy is good or bad, you need to attribute what revenue comes from each source.
Perks?
More than just coffee, you need to watch what you are spending on perks. Another area to watch. In good times and bad, your team watches every little thing you do, and they put their own values on that. That can have a huge impact on team morale. Think about optics. It might be Ok, but if it doesn’t look good, avoid it.
The Last Resort: Consider Salary Cuts
When I was the best-dressed janitor in Marin County, I was also the lowest-paid janitor in Marin County. My brother and I cut our salaries to zero for three months. When we were able to restart our salaries, we kept them artificially low until we could build up a cash reserve. It wasn’t fun but it was necessary. It paid dividends in the long run.
We were fortunate that we didn’t have to ask anyone on the staff to take a cut. But, our selective replacement strategy worked well enough to keep us from that. Although we did cut some low-performing team members.
No matter how well you position them, employees look at their salary reductions and immediately start looking for another job. Put another way, salary cuts are not the most effective talent retention strategy.
Rip the Wax Off Fast!
I’ve been told that in the waxing salons, they rip the wax off as fast as possible. There is no point in pealing it off slowly and extending the pain. Fortunately, I’ve never been to a waxing salon. It probably isn’t on my bucket list.
If you are going to make cuts, make them quicker and deeper than you think you need to. You can always add people back. If you have to resort to a second round of cuts, it is exponentially harder to manage and maintain morale.
If your initial estimate is off, and you need to come back to a second round of cuts, you’ve lost most of your credibility. It will take a long time to rebuild it to the point it once was.
Machine shop leaders can attempt to save as many jobs as possible. While that is noble, it is not the best strategy. If you have to cut again you only make it worse.
The better approach is to cut deeper and rehire when you're ready to put things back together.
The other primary reason to cut deep is to create some cash buffer in the form of additional profits. Opportunities get created when a market is under stress, and you can take advantage by hiring an
A player or buying a competitor weakened by the recession. If you haven't cut deep enough and left yourself with a razor-thin margin, you won't have the flexibility to jump on an opportunity like that.
Don't Lose Your Credibility
The other lesson learned from cutting once, cutting deep, is to be as transparent and honest as possible about the situation. If an employee asks, "Is that the end of the cuts?" what is your answer?
The last thing you want to say is “yes.” If you say yes and you have to return to another round of cuts, you’ll lose some, if not all of your team. Rebuilding that trust will be even more difficult.
When we had to make cuts, we had company meetings and discussed the business as a patient in the hospital. We talked about the plan to get back on our feet. We talked about what could go wrong and the plan to address the things that could go wrong.
We needed to explain to our team in a way they understood what was happening. The patient in the hospital worked. You may have another way or another metaphor to explain the situation.
The most critical element in all of this is telling the truth. Don’t tell the people what they want to hear, tell them the truth. In the end, that is really what they want to hear, even if they won’t say that.
Keep Your Eye on The Prize
Even in good times, leaders have a very tough job. You get to make all the tough choices. You get to take all of the risks. Sometimes it seems like you don’t get rewards that make up for it.
You get to deal with self-doubt. You don’t get any mulligans. Those are the good days!
It is important to remain focused on the goal of getting your machine shop back into good condition and back to leading the market.
Remember. More millionaires were created during the Great Depression than at any other time in American history. That includes the crypto-craze! Even when the economy gets a little wobbly, there are opportunities. You just need to take advantage of them.
If you haven’t read the 3-part blog series, “Differentiating Your Machine Shop – Why Making Parts is No Longer Enough.” That series has some key takeaways that tie directly to this post.
To start your journey in CNC automation and prepare your machine shop for whatever comes our way, call us at 866-952-9020 and then press 1 to start the conversation.