In a climate of anxiety about the future, when whole countries are going bankrupt, it is prudent to reduce non-essential spending to a minimum. In naval terms, ‘batten down the hatches’. But random cuts based on what is easiest to eliminate are not a good idea. While a target reduction in costs is essential the specific items to be cut need to be very carefully considered. How do you decide where to slash?

This is the time for your very best – and most difficult – forecasting. Don’t worry that your forecasts do not always come true. A thoughtful forecast is always more reliable than an arbitrary or random decision.

First consideration is what or who makes the most money for you. You need to assess for each of your big profit earners:

1. How is the downturn going to affect the profitability of this important sector?
2. Is the decline inevitable or can we do something to at least reduce the impact? If, in your opinion, the decline in sales is a foregone conclusion whatever you do, don’t waste money trying to prop them up. Cut costs to reduce the losses.
3. If the record of a market is that it responds quickly to promotion or advertising, don’t chop that budget – maybe even increase it. Sales may decline but it is likely that products or services seen to be giving the best value for money, while themselves prospering, will continue to be patronised by the consumer. Value spending is as important to a company as it is to a distressed consumer – that is when the TESCO tag-line “every little helps” comes into its own. While on the subject of TESCO, isn’t it interesting that the company’s real break-through with the consumer came when it upgraded its original ‘pile it high and sell it cheap’ policy to ‘Mrs Housewife wants a more comfortable environment in which to shop’?
4. The strong profit earners need all the attention you can give them now. If they have any weak management, weed it out and put in the best talent you can. Your flagship earners have to be kept going at all costs. The companies that fare best in hard times are those that are perceived to be trustworthy and give consistently good value for money.
5. Review your assets, especially the people. Two of the companies I am privileged to help have suddenly found a new source of ideas both for expansion and for cost savings by the simple expedient of asking their staff. Not rocket science but often forgotten.

Where will the cuts be made? Obviously the under-performers will go. So will those not producing the life-blood of the business. Some of the investment in staff development may be deferred, at least for a while. Ambitious plans for development of the business will have to be re-scheduled to a time when sources of funds are easier and return can be seen to be faster.

Do not assume that only big cuts matter. Many small savings can also amount to something sizeable. Beware of cutting out those who supply the essential information on which your survival decisions depend. I have seen attempts made to reduce already sparsely populated accounts and IT operations, with disastrous results. If anything, quicker and more accurate information is the order of the day, not less or outdated or non-existent data.

Over the last few years many businesses have flourished and been extended almost beyond their capacity. This has sometimes meant that training and development has been left behind in the rush to get the work done. Normal or sub-normal working will now be more likely and this presents an opportunity to catch up with missed opportunities to prepare for new products and services.

Most important of all in the current crisis is the ability to be creative. New needs, changing markets, additional opportunities, ingenious use of senior or home workers, smart sharing of jobs and an open mind to different ways of doing what we have always been doing are all possible contributors to survival and future growth. A moment’s thought is often worth an hour’s sweat.

How soon do you have to take action? You should have already started.

I have a Mentee who, like many before him, has come to me because he is uncertain how to progress his career. He knows that my way of dealing with this, and other subjects, is to ask questions and help him come to his own conclusions. Of course, I will tell him if I think he is coming to the wrong conclusions but I won’t reach the conclusions for him. If I do they will be my solutions to his problem. He doesn’t want those, he wants his own solutions. When my Mentees have the right questions posed to them and are given the chance to test their ideas on their Mentor, they will nearly always come to the right conclusion.

Back in January I wrote about outsourcing, about the good and bad sides of handing over some of our work to others. Some of you have asked a very pertinent question – should we outsource thinking? After all, you might believe that my Mentee was doing just that.

We do outsource thinking anyway when we hand over our accounts to the auditors and ask for a view. We do so when we employ an advertising agency to create our image or promote our products and services. Market Research companies do an information-collecting job, but we ask them to draw conclusions from the results of their work. Clearly it is good to outsource some thinking.

The problem arises when we outsource the basic thinking and planning of our lives and businesses. There are many consultants waiting to tell you what to do with your business or how to conduct your life more successfully. Outsourcing such fundamentals to them is not a sensible spreading of the load, it is abdication of personal responsibility.

That is why the best consultants ask questions – relevant questions – but don’t provide cut and dried answers. It’s not, generally, because they don’t have a view; it’s because they want you to develop your own view. If you need help with thinking about a problem or opportunity you are sensible to seek it. Bouncing ideas off others is the best way to test them. Let them have the facts – plus your thinking – and see if they can sensibly critique your thoughts. But don’t ask them for a solution.

Look at it this way, when you start a new job you are given a job description. You know what your responsibility is. There is good reason to seek the help of those who are more experienced but the decisions you come to are yours, based on the best evidence you can muster. There are two major dangers in outsourcing thinking to the point where you abandon your own decision in favour of a consultant’s.

I am sure you would never do so as a way of escaping any blame that might arise if the decision turned out to be wrong. I am equally sure that you would never steal the consultant’s ideas and present them as your own; of course not. But there is a risk that you might be tempted to think this was a way of escaping your responsibility.

More dangerous, however, is the fact that the consultant is simply not you. He is not familiar with the style and culture of the business. If he is good he will try to absorb these things but he will never be as immersed in them as you are. So his answers will never be as good as yours.

But his questions may be a good deal better. That’s what you hire him for.