Submitting your good work to the knowledge base is easy. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Directions for enterprise optimization

Specialists of the Swiss consulting company Swiss Consulting Partners are ready to provide services in the following areas of company optimization:

Optimization and reengineering of the organization’s business processes
Optimizing interaction between company departments
Optimization of information processes
Optimization of the internal control system
Optimization of the management structure of the enterprise
Production management
Sales management
Sales management, accounts receivable management
Inventory management, transport and warehouse logistics

One of the most common options is to optimize enterprise costs. This process does not mean simple cost reduction. In some cases, on the contrary, an increase in a certain expense item allows you to increase sales volume many times over. For example, advertising expenses, product promotion expenses, etc. The company's cost optimization should be carried out by determining such a minimum set of expense items that will allow obtaining the maximum profit, all other things being equal. Reduce costs by searching for internal reserves, reduce semi-fixed costs by increasing production volumes, and establish strict budget discipline at the enterprise.

The profitability of an enterprise can be maximized by improving business processes and optimizing enterprise management. The speed and balance of decision-making directly depends on the organizational structure, so optimizing the structure of an enterprise will make a significant contribution to increasing its profits.

Even the most efficient enterprise can lose financial independence if there is a lack of funds. Therefore, the financial stability of the enterprise, its solvency is a priority task for maintaining its efficiency. Optimizing the cash flows of an enterprise allows you to achieve a balance of financial flows and ensure the availability of funds sufficient to conduct business activities. The main goal of optimizing an enterprise's cash flows is to achieve synchronization of the formation of financial flows and maximize positive net cash flow. The desired effect is achieved by developing a set of measures to accelerate the inflow of funds and slow down their payments.

In the long term, the efficiency and financial stability of the enterprise lead to the achievement of the main strategic goal - increasing the market value of the business. But maximizing market value is possible only by optimizing the enterprise's capital. Achieving a combination of equity and debt capital, ensuring maximum market valuation of all capital, is the main goal of optimizing the capital structure of an enterprise.

The specialists of the Swiss consulting company Swiss Consulting Partners have extensive experience in this area of operational consulting and are ready to offer you the most effective solutions.

Find out more about enterprise optimization services -

“... we are forced to start optimization in the company. There is a crisis in the country. The industry is a mess. The strong eat the weak, and our future depends on the efficiency of operating activities,” said the CEO, playing with a gold watch on his wrist. Note – further reading is not recommended for persons with unstable mental health.

Optimization or how to cut bones

“Optimization is not an easy task, and I asked you to send me your suggestions in advance. Your bright minds “gave birth” to the following: cut employee salaries, close customer service offices, charge employees for room and board, charge employees to write off defects and shortages, halve compensation for gasoline expenses, stop purchasing office supplies, print documents in “drafts”, make a number of reductions in line personnel, and so on.”

Is this a familiar picture? If yes, then I hasten to congratulate you, you have witnessed how optimization occurs in an ordinary Russian company.

It’s strange, but for some reason we understand the word “optimization” as reducing the company’s costs. “Reduce costs. Reduce costs. Cut the bones…” – these are synonyms for the word optimization in Russia. Nobody considers optimization from the point of view of efficiency, namely the ratio of costs and results obtained. Why? For three reasons:
1. Many companies have a priori inflated their costs in the wake of super-profits, which means that the easiest thing to do is to cut these same costs.

2. In the equation “optimal state = high efficiency = costs / performance results” they see only one component - costs. In fairness, it should be noted that in small businesses, most often the costs are already minimal, and each employee is “a priest, a reaper, and more :)…”, so opportunities to increase efficiency are simply hidden behind the appearance or real workload of staff.

3. There is no motivation of employees for real, rather than visible optimization. Yes and you. Yes, you, company owners, understand that employees spend and optimize your money, not theirs. What to spend, what to cut – everything is the same.

Now I'm optimizing everything here! – middle manager in a Russian company.

Here's another fresh example. As you know, business process automation is a good way to optimize. Automation allows you to free up employee time, reduce the cost of operations and generally increase their efficiency. The only problem is that the cost of IT employees is relatively high, which means that their work on automation is quite expensive. And here you may receive an answer from the owner of IT resources that performing operations necessary to optimize the work of other employees or departments by IT specialists is very expensive. And since optimization is in full swing, the IT department cannot afford to waste the expensive time of specialists, and therefore money, on such work... Do you think I’m making this up? But no. Just recently I heard such a statement at one meeting.

The problem is that optimization brings up in many heads Repin’s picture “They have sailed. They rowed all night, but forgot to untie the boat.” For a bright, optimized future, employees forget about one of the basic laws of the universe - the law of conservation of energy. To get something, you need to spend something. In other words, if you simply cut the bones, then optimization in the form of cost reduction becomes an end in itself. But the goal - to achieve an optimal state - is lost in the clear minds of dedicated managers.

What is optimization? It is achieving an optimal state of efficiency. This is the state in which marginal cost equals the company's marginal revenue. Yes, yes. In economic theory, this is called “optimal output.” You studied economics at the institute? Optimization cannot exist without calculations and economics.
What is optimality or optimum?

OPTIMUM (from Latin optimum - the best) - a set of the most favorable conditions; the best option for solving a problem or the way to achieve a goal under given conditions and resources. Economic optimum in a broad sense is the most efficient functioning of production; in a narrow sense, it is the best use of material resources, which achieves the possible maximum production effect or the possible minimum costs.

Do you understand? Optimality lies not in reducing costs, but in increasing the return on costs.

Quite often, actual optimization in a company requires not only not cutting costs, but even increasing them. On the other hand, you may not reduce costs, but increase efficiency through increased productivity.

It is the second path that most often remains unattended. Why? Because it is not as easy to implement as simply cutting costs. You have to think right now! And also invest time, and therefore money.

Optimization in reality – one wrong step and boom! Oh yes, “well-wishers” also help

Think not about cutting employees' salaries, but about how to increase their productivity. For the same money, you will get more bang for your buck, which means you will increase efficiency.
Massive cost cutting has more than once led companies to a very sad situation. The situation is this: we don’t have enough funds to move forward, so in order for funds to appear, we need to cut costs. But as soon as the reduction occurs, there is a decrease in returns and efficiency. Now the company not only does not move forward, but also begins to slowly roll back. As in the joke, for the salary that they pay me, not only should I not work, but I should also do a little harm.

Before cutting costs, it is necessary to calmly assess the possible consequences.

Cut salaries and charge money for company services? – employee efficiency will decrease. Some will quit.
Stop buying office supplies? – documentation, storage and processing will be affected.
Cut your gas costs? – employees will stop traveling on company business.
Remove tea, coffee and cookies? – do you really think that people will spend less time on coffee if it is removed?
Blame the fault on employees? – product returns and customer dissatisfaction will increase.
And so on.

Does all of the above mean that optimization does not involve cost reduction? Not at all. You just need to look at the whole efficiency formula. This means considering not so much costs as return on costs. In one situation, costs may be unreasonably high, then they need to be reduced. In another situation, it is better to leave costs as they are and increase productivity.

Costs also include various “losses”. Losses are not only the “fat” and excesses of the company’s operating activities. These are, and most likely, first of all, losses associated with the efficiency of operating activities. More information about the types of losses can be found in.
The main thing to understand is that losses are everything that does not create value for the company and the client. By the way, from this point of view, redundant, ineffective management apparatus is the first candidate for “optimization.” Ha ha!

Now let's get serious. If optimizing your company is vital, proceed in the following order:

Get rid of expenses that can be safely classified as unnecessary.

Unnecessary costs are anything that does not add value to your products and services, does not affect customer attitudes towards the service and the company, does not reduce productivity and staff attitudes, and does not aim to strengthen the safety and competitiveness of the company. An example is corporate cars that are expensive to operate, payment of management’s non-production expenses, expensive equipment, etc.

2. Eliminate operational inefficiencies. Working groups, long meetings, bureaucracy, multi-stage approval, etc. All this reduces efficiency. Pay special attention to support and management processes. They only incur costs.

3. Assess the performance needs of core processes. Producing more does not always mean better. If the limitation is on the market side, then there is no need to maintain large production capacities. Some can be preserved. Make decisions about cost reduction only after assessing the actual resource needs.

4. Focus on increasing the productivity of all processes - while maintaining transaction costs. First of all, pay attention to the main processes.

Optimization aims to increase efficiency. Efficiency is maximum results with minimum costs.

V. Gagarsky Head of the direction “Regulation and optimization of the management system” of the Nevskaya Consulting Company, practicing business coach

Optimizing the number of personnel is one of the methods for reducing business costs

The purpose of any business is to generate profit for its owners over a sufficiently long period of time. From this truism it follows that a business owner always strives to increase revenue and reduce costs. Thus, the main task of any businessman is to increase the economic efficiency of his business, that is, in fact, its profitability.

There are two ways to increase business profitability: either by increasing revenue or reducing costs. Of course, there is a certain connection between these two indicators. But in modern conditions, characterized by fierce competition for consumers and oversaturation of the market, it can be extremely difficult to increase turnover and prices for products, so one of the most important ways to increase business efficiency is to reduce costs.

Typically, the problem of cost reduction is approached as follows. First, it is necessary to analyze the cost structure and select those cost items that make the greatest contribution to costs. Secondly, we need to determine which cost items can, in principle, be reduced, and to what extent we can manage these costs. Let’s say the cost item “raw materials” makes up 50% of the total cost structure, but if we cannot find suppliers with lower prices, then it is extremely difficult to reduce this item significantly for a given volume of output and without changing production technology .

One of the expense items that can be reduced within certain limits is personnel costs. They include not only the payroll and payroll contributions, but also:

expenses for the social package and benefits for employees;
expenses for industrial training and retraining of employees;
costs of selecting candidates and hiring;
safety costs;
The cost of maintaining workplaces, including the cost of work clothes, lighting, heating, cleaning of workplaces, etc.;
other types of personnel costs specific to each enterprise.

Therefore, by optimizing the number of personnel, we reduce not only the payroll and deductions from it, but also all other costs associated with personnel, which should be remembered.

The essence of optimizing the number of personnel is that it is necessary to reduce the number of personnel working at the enterprise to a minimum, subject to two restrictions:

Guaranteed high-quality implementation of the specified production program must be ensured;
Personnel costs should not exceed a certain predetermined amount.

Thus, when they talk about optimizing the number of personnel, they primarily mean reducing it. The excess number was partly due to the social policy of the USSR, when the state sought to ensure 100 percent employment of the population, and enterprises were created precisely with this in mind. But in our opinion, a more serious factor in the increased number of personnel is worn-out equipment and not the most modern technologies, due to which it is necessary to maintain a large number of repair and maintenance personnel.

It is especially important to emphasize that a reduction in the number of personnel should take place at least without reducing production efficiency, and even better - if with an increase. As a rule, this is achieved by introducing new equipment and technology in production, and optimizing business processes in the management apparatus.

So, when we have decided that optimizing the number of personnel in a given organization or enterprise is necessary, a logical question arises: what is the best way to do this?

Methods and approaches to optimizing the number of personnel

Optimizing the number of company personnel should be treated as a separate project that needs to be planned, that is, determine the scope of work, their sequence, deadlines and those responsible for completing each task.

First of all, it is necessary to diagnose the current state of affairs in the field of labor productivity and staff numbers. It is necessary to systematize and analyze the number of personnel in the company by division, taking into account the functions performed by the division and the actual workload (intensity and duration of work). Based on the conclusions obtained during this analysis, a number of measures can be proposed to optimize business processes. In addition, it is useful to think about upgrading equipment and introducing advanced production technologies. All these measures will make it possible to immediately identify those jobs that are subject to reduction as unnecessary.

Next, you should calculate the optimal number of personnel required for the high-quality implementation of the production program, taking into account the optimization of administrative and production processes. Determination of the optimal number of personnel is made using one or another method of rationing the number. Comparing the current number of personnel with the optimal one, we obtain the number of personnel in each department that needs to be reduced. However, we can talk not only about reduction, but also about redistribution of personnel among structural units, if this is due to the need to strengthen individual departments.

After this, it is necessary to plan a reduction program in which two difficult and painful questions need to be answered: “WHO?” and “HOW?” needs to be reduced. Moreover, answering the first question is perhaps easier and simpler than answering the second. Although the first question, as practice shows, is not so simple. For example, the Labor Code of the Russian Federation directly states that in the event of a reduction in numbers or staff, employees with higher labor productivity and qualifications have an advantage in remaining at work (Article 179). Article 261 of the Labor Code of the Russian Federation provides guarantees to pregnant women and women with children under 3 years of age, single mothers with children under 14 years of age or with a disabled person under 18 years of age, as well as other persons raising these children without a mother. Such employees are subject to a ban on dismissal at the initiative of the administration, with the exception of cases of liquidation of the organization. In this case, it may turn out that the listed persons do not have the highest labor productivity, nevertheless, the employer is obliged to keep them at work. Therefore, when choosing candidates for dismissal, such nuances must be taken into account.

Answer the question “WHO?” It will be easier if we accept the concept of the so-called “personnel core” and “personnel periphery.” Any manager intuitively understands that the core personnel are those employees without whom the work simply cannot be done efficiently. That is, the personnel core is the employees:

participating in the main business processes of the company;
bringing the company the greatest profit (or minimizing the company’s expenses);
those with the highest labor productivity and qualifications;
specialists who, due to their knowledge, skills and experience, find it difficult to quickly find a replacement in the labor market;
demonstrating high potential and dynamic professional development.

Accordingly, the personnel periphery is all other employees. Of course, the personnel periphery also performs certain functions, but if any crisis occurs, the personnel periphery can be disposed of without serious consequences for the business, and then, if necessary, new “peripheral” personnel can be recruited.

Let's look at a simple example. The team working on sawing chipboard (chipboard) consists of a sawing machine operator, three auxiliary workers who pull the sawn parts from the machine and place them in stacks, and a forklift driver who brings the chipboard to the machine and takes the stacks of parts to the warehouse. In this case, the “personnel core” of the team will be the machine operator and the loader driver, as the most qualified workers, and the auxiliary workers will be the “personnel periphery”, since they are easy to replace if necessary. The example, of course, is quite conventional, but it illustrates the principle of separating the core and periphery. If you modernize the equipment, you can ensure automatic stacking of sawn chipboard parts into stacks, and then auxiliary workers will not be required in this team at all.

When potential candidates for dismissal have been identified, it is necessary to select methods by which staffing or headcount reduction will be carried out. There are two fundamentally different approaches to reducing numbers, which can be called “hard” and “soft”.

The “hard” approach is a classic staff reduction: a certain crisis occurs, a decision is made to reduce costs by reducing staff, ineffective jobs are identified, employees are warned two months in advance about dismissal, they are paid the compensation required under the Labor Code and fired. Thus, the reduction procedure occurs quite quickly, and with relatively low costs (severance compensation). However, this approach has more disadvantages than advantages. Firstly, in the case of quick and hard cuts, there is a risk of a mistake, which will result in conflicts for the enterprise, both with the dismissed personnel and with trade unions. Secondly, in the case of a city-forming enterprise, the emergence of mass unemployment may result in increased social tension in the region, and this, in turn, may affect relations with the regional administration. Thirdly, the moral climate in the rest of the team is deteriorating—hard layoffs do not add loyalty to employees. And this ultimately affects a decrease in labor productivity.

“Soft” methods of staff reduction are based on the desire to avoid direct layoffs on the initiative of the administration; their essence is to create conditions for stimulating a “natural” reduction in the number of personnel. “Soft” methods are aimed at preventing such situations when mass layoffs are required.

All “soft” methods can be divided into three groups:

“natural” disposal;
"soft" reduction;
headcount management without reductions.

“Natural” staff attrition

“Natural” staff attrition refers to methods in which staff leave on their own, on their own initiative, and the administration’s task is to create some conditions for this. The easiest way is to temporarily prohibit the hiring of new employees by issuing an appropriate order. At the same time, there will be a natural loss of staff: someone will quit for personal reasons, someone will want to retire, etc. However, if the turnover of personnel at the enterprise is not very significant, then you should not rely too much on this method. Retirement of employees who have reached retirement age is also one of the options for natural retirement. Of course, we are talking about the voluntary decision of the employee himself - the pensioner. Retirement can be stimulated by lump sum payments to such employees, or by participation in a corporate pension program.

The most “tough” of the “natural” attrition methods is to stimulate voluntary dismissals by tightening the personnel certification procedure and modernizing the material incentive system. If an employee does not pass the next certification, he is subject to either dismissal due to inadequacy of the position held, or transfer to a position corresponding to his qualifications (i.e., paid lower). Both encourage employees to quit on their own. Naturally, when subsequently hired, the employee himself is interested in ensuring that his work book does not contain a record of dismissal due to inadequacy of the position held. In addition, you can “punish with rubles” employees who violate labor discipline, that is, deprive them of bonuses for relevant offenses, if such a possibility is reflected in the Regulations on bonuses. Well, in cases involving repeated failure to perform without good reason or gross violation of labor duties, employees are subject to dismissal at the initiative of the administration (Article 81, clauses 5 and 6 of the Labor Code of the Russian Federation).

"Soft" reduction

We include the following methods of “soft” reduction:

use of early preferential pension programs;
transfer of some personnel to subsidiary business units;
encouraging voluntary dismissals through an attractive compensation system and support for further employment.

Early preferential pension programs are aimed at reducing the number of employees approaching retirement age. The principle is that such an employee is offered an agreement according to which the employee will be paid a part (say, 75%) of his average salary during the period remaining until he reaches retirement age, but he must not work either at the enterprise itself or anywhere else.

A good way to restructure a business, one of the results of which is precisely the optimization of the number of personnel, is to separate non-core activities into subsidiaries of the parent company. As a rule, there are various service departments: repair, transport, etc. divisions. The relevant personnel are transferred to these subsidiaries. This can significantly reduce the headcount of the parent company. Typically, the parent company initially supports its “daughter” by providing it with a certain volume of orders. However, it is important that the subsidiary operates in a competitive environment and is forced to reduce prices for its services for the parent company. Otherwise, the costs of the parent company will even increase, since the subsidiary includes all its expenses in the price of its services, which increase taking into account the spin-off.

Incentivizing voluntary dismissals through an attractive system of compensation and assistance in further employment (so-called outplacement) is especially relevant for city-forming enterprises. Nowadays it is customary to talk a lot about the social responsibility of business, and this is exactly the case when social responsibility must be present. As one of the options, the employee is offered compensation greater than what he would have been entitled to upon dismissal due to staff reduction. This may encourage the employee to resign on their own.

Support for further employment is linked to investments in creating new jobs in the region. Such programs are created in close cooperation with the local administration to stimulate the development of small businesses. For example, a company may offer an interest-free loan to redundant employees so that they can start a business.

Businesses can also rent out their unused premises to entrepreneurs, who will also create additional jobs. For example, you can create a workshop for sewing workwear (as a separate company), and hire previously reduced support staff. And there can be many similar options.

Managing headcount and personnel costs without making cuts is the most promising way to avoid the need for dismissal at the initiative of the administration. For example, for temporary or seasonal work it is better to use fixed-term employment contracts. Of course, you should use this tool very carefully - you must be prepared, if necessary, to justify that the work is indeed temporary.

You can also attract specialists under contract agreements for certain work, and you can also think about outsourcing some of the functions altogether.

In the event of a sudden crisis, when it is necessary to sharply reduce costs, you can transfer staff to part-time or part-time work. However, the experience of using this method in the mid-90s at Russian enterprises suggests that this is really an extreme measure and not very effective in the long term. Part-time or part-time work essentially means hidden unemployment with all its attendant disadvantages.

The method of transferring individual units and brigades to internal self-financing has been undeservedly forgotten. This method was actively promoted during the perestroika period. The brigade is assigned a certain wage fund for a specified amount of work, and the brigade independently distributes this fund among its employees. This motivates the team to get rid of ineffective workers. It is important not to cut the team’s wage fund, because otherwise this method will not work.

By using “soft” methods of downsizing, the company solves two problems - it reduces personnel costs, and at the same time ensures the loyalty of both remaining and former employees. Of course, some of these methods may be associated with additional costs for implementing a reduction program (compared to “hard” reductions), but they avoid the disadvantages inherent in staff reductions initiated by the administration.

Implementation of the personnel optimization program

In order not to be unfounded, we can give an example of resolving issues of staff reduction, in which the author personally took part as an invited consultant. The utility's subsidiary, which I am not allowed to name under the terms of a confidentiality agreement, was spun off on January 1, 2004. This subsidiary provided engineering and technical services to the parent power system and third-party contractors. The number of personnel at that time was 65 people. Based on the results of work for the first quarter, the company showed a loss from its activities, and the company's management began to take steps to determine the reasons for this situation. The management's attention was focused on the largest division of the company by number - the Design Bureau, which numbered 28 people (43% of the total number of the entire company). At this stage, consultants were invited who were asked to understand the activities of this division and propose measures to reduce its costs.

First of all, a matrix of department functions was built, describing the distribution of functions among employees and allowing one to analyze their workload. In addition, statistics on the design and calculation work carried out by the Design Bureau for previous periods were collected and analyzed, including in terms of financial results. It was found out, in particular, that the PKB payroll exceeds the revenue from completed projects, that is, this division was clearly unprofitable. In parallel with this, an assessment of the PKB staff was carried out in order to determine their professional potential and ability to work more intensively in new conditions. As a result, a “personnel core” and a “personnel periphery” were identified within the PKB. Based on the analysis, the following action plan was proposed to the management of the enterprise: reduce the staff of the department by 40% (indicating specific candidates), while in order to reduce the risks of non-fulfillment of projects, actively attract students from the local architectural institute for practical training, who could, under the supervision of experienced specialists carry out simple design work. It was determined that the majority (57%) of the projects carried out by the PKB were quite simple, that is, the approach involving trainees was justified.

In addition, a project method for managing design bureau work was proposed, with clear monitoring of compliance with project plans, in order to increase the speed of work completion.

These proposals were presented to the company's management, they agreed with them and carried out a number of measures, as a result of which personnel costs were reduced and labor productivity increased.

Optimizing the number of personnel is a difficult and painful tool for reducing company costs. If you apply it carefully, after a comprehensive analysis of the current situation and forecast of the consequences, it will work effectively and give the expected results. But it would be even better to build the organizational structure and management system of the company in such a way that it would be possible to prevent situations when it is necessary to reduce the number of personnel.