Organizing and Delegating-Management of Organizations - Essay Example

An effective cost reduction plan should achieve results that flow from top to the bottom line of financial matters (Mosley, 2008). The plan should be designed in such a manner that its implementation does not damage the organization itself. In fact, it is argued that a good cost reduction program should focus much on damage control as it involves cutting costs. The ways of communicating these measures are equally important, especially if it concerns salaries of the employees. Cost Reduction Plan All cost reduction plans aim at reducing costs in order to improve profitability.

It is apparent that by reducing expenses, profits are increased. In the current scenario, it is apparent that most of the company’s expenses go to employee salaries. With 90 percent of the company’s expenses being channeled in one department, it becomes tricky to have an effective cost reduction plan in place. In this regard, it is advisable to have a cost reduction team comprising all departments. In the beginning, the head of the cost control team should ensure that the idea of cost reduction is well discussed with the team members.

In the current scenario, since cost reduction measures will mainly focus on reducing salaries of the employees, it is also advisable to have all departments represented by employees in the cost control team (Mosley, 2008). However, the meeting should be frequent, probably once in a week. This helps the effort not to lose momentum. Every meeting’s minutes should be published and availed to the chief executive and the heads of each department. The minutes should include the status of each task in the meeting.

Cost reduction team members should discuss ideas in a free flowing manner. The ideas should primarily focus on the agenda of the meeting with a contribution from team members being well recorded. Since the main area of concern is salaries, it is equally important to consider a review of other areas that could also be highly contributing to losses. For example, the cost of raw materials, electricity, travel, maintenance, etc. may as well be reviewed (Suzue, 2002). However, the next step involves cost necessity assessment.

In this regard, evaluation of the magnitude of necessity of cost items identified is done. Most crucial items should be retained, but suggested reduction should be applied. Items with less magnitude of necessity should be evaluated for other options. Issues concerning salaries range from labor costs and morale initiatives to training costs. The table below indicates a cost reduction proposal that can be used to reduce cost associated with employee salaries and benefits. Item Classification Risks Decision Labor Necessary None Keep but reduce cost Supervision Necessary None Keep Overtime Necessary Morale impact Keep but reduce Coffee Unnecessary Morale impact Eliminate Department party Unnecessary Morale impact Keep but reduce Communication Plan Before any decisions are made on the measures to use in cost cutting, it is vital to consider the number of permanent employees and those that are in contract.

This sets a pace in evaluating implementation negotiations (Coombs et al., 2005). The first step involves analysis of the situation that has led to seeking the option of cost reduction. This could be termed as