Corporate Cost-Cuts May Lead To Trouble Down the Road

As an office-supply dealer, we’re definitely noticing that one of the first stops for a corporation looking to cut costs tends to be the supply cabinet. In general, this rough economy and its effect on the office-at-large is something that concerns all of us, so it’s always interesting to see others’ takes on it. For example, this new article from Reuters has some grim projections:

“If you cut into flesh long enough, eventually you find bone,” said David Rosenberg, chief economist at Gluskin Sheff in Toronto. “Cost cutting is not a bottomless pit.”

Firing people, introducing hiring freezes, halting investments, trimming budgets or even skimping on office supplies are time-tested ways to prove the old adage that a penny saved is a penny earned.

A slew of companies reported better-than-expected first-quarter results because aggressive budget slashing more than made up for falling sales. According to Rosenberg, 40 percent of companies missed their top line expectations in the first quarter.

Basically the article is stating that while slashing deep now can help pull a company out of a slump, it’s going to leave a lot of people stranded and playing catch-up when the economy finally rebounds. It’s a snowball effect: imagine you fire a lot of people, cut office supplies, reduce office space…now you’ve got more money and the economy is bouncing back. Not only do you have to re-hire everyone, you have to make sure they all have staplers and a place to sit.

It’s a logistics problem that I think a lot of companies are not yet taking seriously. We’ll see how many of them are left standing once the economy pulls itself up by its bootstraps.

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