That brings us to the point of austerity measures for a company. Over a period of time, as the business picks up, a company typically starts loosening its grip on its austere ways. It can happen in many ways.
a. As the budgets increase, one starts negotiating less harder on the smaller line items. (When the media budgets grow by crores, spends of Rs.5 lakhs and below assume less significance. A lot of smaller line items could just slip through without proper negotiation because people don't have time for it)
b. People start travelling at the drop of a hat while a call or a video conference could have helped deal with the issue. (Bangalore-Mumbai-Bangalore: 5 hours of travel including the commute. 60 minutes of meeting. Relaxing lunch at a nice restaurant. Who is complaining?)
c. The company starts hiring for the future (and not the present) and begins to put on flab. (In the garb of bringing in specialists, more people are hired to divide the job which was earlier done efficiently with less number of people)
d. Salaries begin to jump up without proper authorisation - the excuse? "In these times, we cannot get good quality talent at our scales". (Because one finds the right person, one goes overboard to 'match' the market salary, which in any case is subjective)
e. Team parties get more frequent and spending caps get relaxed. (I was surprised at the spend pattern at a well funded start-up where a team party of 30 odd people would end up with a bill of more than Rs.75,000)
f. The company starts buying things which are not compellingly required. (Exclusive laser printers for each department? Upgrading laptops much before time? Giving key executives the newest phones every 12 months?)
g. The tastes get expensive! (A modest Indica cab becomes a Ford Fiesta and a more senior executive now travels in a Corolla. One starts staying in a more upmarket hotel replacing the old faithful who kept company during difficult times)
The real question is if austerity should be exercised only during tough times. Isn't spending well (as against spending less) a sound business principle?
Of course, one would argue that if businesses can afford to spend more, they should. And in any case, what's wrong in enjoying the success? However, companies might want to look at a few parameters before okaying material changes in the spending pattern.
a. Is this a spend we can stop tomorrow if we need to? (Marketing budgets are a good example - if the quarterly sales numbers are not coming up as per expectations, a good way to pull back and save your profit projections is to reduce the remainder of the marketing budget)
b. Is this a spend that can play havoc with the 'ego' system of your key executives? (Who doesn't want to fly business class? Or stay in a cool 5-star hotel? While no one grudges these privileges to your key executives who have brought you success, when you bring the privileges down, considering these privileges are more like 'status factors', dissentment is inevitable.)
c. Which arc would you place this spend in - the "need" arc, the "comfort" arc or the "luxury" arc? (Even in good times, businesses would do well to straightaway disallow spends in the "luxury" arc while being moderate in approving spends in the "comfort" arc)
d. There should be a strict 'upper cap' on all spends that can be termed 'recurring expenditure' (and this includes the salary) with a 'zero tolerance' view on non-compliance. (For example, hiring of more people than one needs at a salary level much higher than one can afford is an invitation for disaster - it's something one has seen at close quarters many times over)
Are these austerity measures or are plain good business measures? Perhaps, your views will add to the perspective.
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