0
Just a Flesh Wound! How Not to Cut Costs
On April 26, 2016 / By Alan Quintero

Navigate

Caution - Cost Cutting Ahead

Monty Python and the Holy Grail is one of funniest movies I’ve ever seen. One of my favorite scenes is the Black Knight skit. For those of you who haven’t seen the movie, you can watch the five-minute scene here (although I recommend you watch the whole movie!) In the scene, King Arthur tries to cross a bridge, but the Black Knight refuses to let him pass. They enter into a sword fight and King Arthur cuts off the Black Knight’s limbs one by one. The Black Knight responds:

  • After his left arm: “’Tis but a scratch.”
  • After his right arm: “Just a flesh wound.”
  • After his first leg: “I’m invincible!”
  • After the second leg (and King Arthur crossing the bridge): “Oh, oh, I see, running away then. You yellow b***! Come back here and take what’s coming to you. I’ll bite your legs off!”

I’ve always thought of cost cutting to be like a surgical procedure where a doctor wants to remove the diseased tissue, but ensure that the patient stays alive and gets better.  However, lately it seems that cost cutting in energy companies looks more like the Black Knight in Monty Python and the Holy Grail, with companies madly continuing the fight although they’re missing their arms and legs.

Although I admire the gumption of the Black Knight, this is no way to go about executing cost cutting measures in your business. Here’s why:

Somebody else is deciding what to cut.

In the movie, King Arthur does the cutting and the Black Knight has no say. When executing cost cutting measures, it is best if management decides what to cut. Letting analysts, board members and other external parties make these decisions won’t work because they don’t have the insight into your long-term strategy and/or the full understanding of your current position.

There is no path to being as healthy as before the cuts.

For the Black Knight, there’s no way to fully recover after losing his arms and legs. Likewise, overzealous and under planned cost cutting can leave your organization critically wounded.  Instead, use a deep understanding of your current state and long term strategy to eliminate costs today that don’t impair your future. Try to make these cuts scalable so they can be reversed when the up cycle returns. Use a scalpel, not a sword.

Regardless of how hard you fight, the competition still gets the advantage if you make the wrong cuts.

In the end, even as courageously as the limbless Black Knight fights, King Arthur crosses the bridge. When making cuts, understand what elements of your business are critical to the bottom line and competitive position, and begin cutting elsewhere.  Otherwise you may be opening a door for your competition to pass you.

Trenegy helps companies successfully plan and execute cost structure improvement projects. Our three step methodology clearly confirms what needs to be cut, maps out how the trimming can be done in a scalable way–which allows for future growth, and ensures that you stay ahead of your competition. To achieve your desired goals, we work with you to:

  • Survey: Clarify your strategy, the levers that drive your bottom line, and your current processes, organizations and systems.
  • Target: Draw a clear vision of what your organization, processes and systems need to be to achieve your strategy while lowering costs.
  • Roadmap: Prepare a detailed step-by-step plan to achieve your cost reductions rapidly (while maintaining a healthy organization) that provides quick wins.

When times are tough, like they are in the energy sector, cost restructuring is a requirement. But bravery alone will not get you through this down cycle. To paraphrase King Arthur: although you may be indeed brave, don’t be a loony.