Hidden Dangers of 25% budget cuts

In tough times we need to make tough decisions

How to cut 25% budget without spiting your face.

With public sector organisations all over the UK (and others) facing mandatory cuts of 25% budget cuts across the board, many are going to make mistakes they will live to regret.

Whether we like it or not the target has been set. The goal for leaders now is to make appropriate cuts.

A couple of weeks ago I ran a leadership and change management programme for a group of senior leaders in Dubai from the Central Bank of Nigeria (don’t ask!) and while discussing change I heard a phrase from my past which struck fear in my heart – “Project EAGLE”.

What is “Project EAGLE”?

This was a change project which was led by a major consulting firm which resulted in losses of jobs – many inappropriately and in an ill conceived way. Now I had come across this approach “Project EAGLE” many years ago in the private health-care sector, now in the banking industry in Nigeria, and research has shown that there are many other such projects around the world. I cannot be sure if they are all from the same stable – but it looks like it.

Project EAGLE was said to stand for:

• Efficiency
• Accountable
• Goal orientation
• Leadership
• Effectiveness

And note the total lack of focus on ordinary people!  No wonder why that so many times when people talk about change management or change strategy, they do so with dread. Indeed, in the health-care company it took many years and a dedicated (people based) change strategy just to recover from the “trauma” that was left behind.

Managing change is more than project management

If less than 50% of you plan is about people, the impact on people and the psychological changes individuals are expected to make – then your change programme is bound to failure.

Shortly after running this leadership programme I was facilitating a Train the Trainer course for the NHS and found out that due to cuts they were closing a dedicated meeting and training venue. NUTS! This venue was close to running at cost recovery with less than 20% of its activity from outside the NHS, with just a small about of growth this could have been an income generator. Unfortunately the managers saw this as an easy cut in spend – without looking at the whole picture. Worse – they were planning to put the resources and furniture in storage costing many £100s a months for the foreseeable future.

Making cuts in budgets is one thing, but looking at this in a holistic way must happen if UK PLC is not to throw lost of time, effort and money down the drains. Who are these incompetent managers that lack vision and basic business abilities? I hope that they are the first to go in any cuts. Services which can stand on their own are potential income generators, while they may not make private sector style margins, they should be at cost recovery plus – so that the facilities are available but without the cost.

Threat or Opportunity?

I honestly hope that all senior managers don’t just get the accountants in, but actually use people with good solid business/ entrepreneurship experience to help identify the real short and medium term threats and opportunities, and build on internal strengths – not just further develop weaknesses.

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