Cutting costs while preserving a productive culture can be a struggle.  After all, cost reduction – especially when it requires layoffs – is not a recipe for increasing morale.  However, you may be able to cut costs in a way that not only minimizes pain, but also increases morale.  Just look at the incentives.

Even people of high integrity naturally show less discretion when spending someone else’s money than they do with their own, so create incentives for your employees to treat company money as if it were their own. 

For example, if you give a department a spending limit for a project, what you’ve actually done is provide an incentive to spend that much money whether it’s needed or not.  Instead, what if you allowed that department to keep what they don’t spend for future projects – or maybe even employee bonuses.  Now you’ve given them more than purchasing power; you’ve given them actual money, and their habits and decisions will change accordingly. 

I’m sure you can come up with even better ideas, but the point is that structuring incentives in the right way will minimize waste, maximize profits, spur innovation, increase trust…and lift morale.

This entry was posted on Thursday, August 19th, 2010 at 10:26 am and is filed under Financial Management, Management, Organizational Culture. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.