Lockdown Opportunity; Reduce Fixed cost to Variable cost…?

Risk factor; MSME should Overcome
May 16, 2020
Family / Partnership Issues in Business
August 4, 2020

Lockdown Opportunity; Reduce Fixed cost to Variable cost…?

Lock down has given an opportunity to think from scratch; like Zero Base budgeting.

Business will re-start gradually, providing multiple opportunities”

  • Survival Need; take Core team into confidence for substantial improvement
  • Target to reduce major part of fixed salary; restructure  it with performance incentive
  • Remove inefficient / underutilised resources by assigning additional responsibility
  • Implement attractive Incentive Plan in all function; with transparency 
  • Strict performance benchmark (30%-40% improvement) in all functions
  • This informal partnership will build loyalty, stability and performers.
  • Invariably collect data (develop MIS) in: procurement, production (all processes), quality, sales, inventory, supply chain etc.
  • Inter Department conflicts has to go; both individual and team performance will matter
  • Free flow of communication with core teamand management is critical
  • Regularly compare Actual performance of all departments with Benchmarks – daily –weekly and monthly – for continuous improvement
  • Outsource non-core / non routine  work – where full time person not required
  • Convert Capex into Opex (lease – rental) / Allow Work from Home, if can be monitored
  • Be transparent  and genuine in sharing – share some part of efficiency as incentive
  • For Entrepreneurs, too difficult to implement but inevitable – since it will reduce fixed cost and improve efficiency; this will become a new routine (Stay light)

This is the time to set example of leadership and transparency which will eventually take organization into a different league and make it future ready.

“Something good comes out of every crisis.”

Your Virtual CFO

CA Sunil Shah

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