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CEO warns business owners that staff cutting may cripple their business

10X CEO, Nic Clark, warns Australian business owners that staff cutting can be detrimental to your business. Instead, strong leadership is the key to helping your business survive the recession.

Staff downsizing may seem like an obvious cost-cutting measure for businesses looking to survive the current recession. However, according to Nic Clark, CEO of national business development franchise 10X Limited, cutting down on staff can often hinder a business’s growth and profitability rather than helping it.

In fact, as Nic Clark points out, recent studies as detailed by the Certified Practicing Accountants of Australia (CPA) have shown that half of all businesses that cut down on staff do not reduce their operating costs, two-thirds do not increase profit and over three-quarters do not increase productivity, showing that staff cutting does not ensure the ongoing success of a business.

As an industry specialist with 16 years experience advising small-to-medium businesses across Australia and New Zealand, Nic Clark has experienced first-hand what downsizing can do to the profitability of a business. “Staff cutting is often the first thing businesses do when they try to reduce costs,” says Nic. “However managers often don’t realise the impact such a practice may have on staff morale and the workplace spirit. Job insecurity can be damaging to staff motivation and is likely to result in reduced productivity. Although management may have made the decision as a way to decrease costs, the opposite is often what actually occurs.”

In line with new findings from a just-released report on Australian businesses, Nic Clark suggests that, instead of downsizing and looking for ways to reduce costs, business owners should take more initiative and seek other ways to keep their businesses afloat. “In such dire economic times, what will differentiate a business from its competitors is strong leadership. Business owners must lead with vision, connect with their employees, implement high performance management practices and have a positive attitude.”