For the first time in at least a decade, inflation has become an urgent short-term consideration for almost all companies around the world. The cost of many goods is rising while the tight labor market is pushing wages up.
This May, U.S. consumer inflation reached its highest level in more than four decades as surging energy and food prices pushed prices higher. The last time the world saw a similar bump was in the first half of 2008, the early months of the Great Recession. Cue panic, right? Here are 5 strategies from companies that weathered that storm, and the best decisive steps they took to counter rising inflation.
Some of the best performers also took significant steps to boost productivity, primarily by cutting costs.
Get spending visibility
High-resolution spending visibility is the foundation of any successful company, enabling managers to understand the full story behind every dollar you spend and what controls exist.
Teams that can accurately show capital allocation — in as close to real time as possible — have a high degree of spend visibility. But spend visibility isn’t limited to just tracking business expenses across the year. It demands both a general and granular look into the productivity and efficacy of the company’s financial operations and purchasing processes. Great businesses will take it a step further and evaluate the human capital allocation; said otherwise, how are the people on payroll spending their time.
Differentiate between strategic and nonstrategic spending
When it comes to spending money on your business, not all expenses are created equal. In your business, there are certain areas where a small investment can make a leveraged return and there are other areas where a big investment can be a waste of money. Building transparency into your operations, including how much time is being spent on various projects, will help capital allocators determine where there are outsized returns or, conversely, bad investments. Top companies are making strategic investments in processes and technology to enhance the productivity of employees or help leaders make better decisions.
Eliminate non-value add work (i.e busywork)
With labor shortages and ballooning costs, eliminating the busywork itself has a significant impact. Companies that do this well use a use a clean-sheet method, which involves rethinking existing businesses from the ground up. For established companies, this is a way to innovate processes by asking the right questions about current practices. Check out our blog post on the Kanban methodology for more. Which leads us to number 4.
Automate routine tasks
After eliminating work, another endeavor is automation. At its core, automation is about implementing a system to complete repetitive and easily replicated tasks without the need for human labor. Technologies like robotic process automation (RPA), workflow management, and intelligent document processing can free up workers and make each person much more effective at creating value. (Pssst...Vsimple)
Hold on to your employees
With an ongoing talent shortage in the U.S. and the costs of hiring continuing to rise, it is increasingly important for employers around the globe to hold onto their staff members. The last thing business owners need is to lose staff during a period of high inflation. Increase retention efforts, focus on showing staff they are valued, and when offering raises, keep in mind that wage increases should reflect inflation increases as well.
By playing both offense and defense in a disruptive environment, companies position themselves to outpace less-proactive competitors long after the volatility ends. Stay proactive with Vsimple!