When times are good, companies are busy growing their business and tend to lose sight of fixed costs. It feels like the good times will last forever, even though deep down we know it will end at some point. The United States has never gone longer than 11 years between recessions. When a recession hits, fixed costs stunt a company’s ability to grow.
The first thing companies do is kill their marketing budget which is the last thing that should go. Companies that market during tough times are survivors. While companies cut budgets and heads, they can’t reduce fixed costs such as office space because they are locked in – sometimes 5+ years. Unless office space drives sales, in some industries it does, companies should resist the temptation to lease more than the bare minimum.
Instead of requiring everyone to work in the office, evaluate each position to determine if tele-commuting is an option. I realize people are social and need to get together periodically to strengthen relationships and collaborate, but is it really necessary to drive to the office everyday. Most people are less productive in the office because of constant interruptions. Studies have shown that employees that work out of their homes are more productive; typically 15 – 20% more productive.
The real reason most companies avoid tele-commuting is management is uncomfortable managing people that they cannot see. Managers are more focused on the how rather than the what. If good employees understand what they need to do, when it must be done, and why – they can figure out the how. If they can’t, it’s most likely a management or training problem.
One of our customers is a completely virtual company. They don’t own any servers or software and they don’t lease office space leaving them very agile compared to their competition. Their staff works out of their house or at a customer’s location giving employees the freedom to leave anywhere in the country – sounds like a good gig if you can get. The president of the company lives on the East coast and has a condo near a ski resort. He re-locates his family for 5 weeks in the winter and summer to their condo and he doesn’t miss a beat running the company. How cool is that? Sounds like a better approach than paying for office space.
What a great way to save money that can be spent on sales and marketing. There have been a number of studies that go back to the early 1970’s related to marketing spend and success during a recession. All the studies found that those companies that maintained their marketing presence during the recession not only out performed their competitors during the recession, but also after the recession was over by as long as 2 years!
SaaS and remote employees is a great way to free up cash for more customer facing actviies.