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Cost Reduction and Restructuring

The painless response to a funding crisis is, of course, to find alternative sources of income, but this may not always be possible in the time that you are able to buy with your financial reserves. In reality, you may well find that you need to reduce costs, because this will be within your control and it will have a fairly swift impact.

Where you “buy in” services from external suppliers, there may be some scope for either scaling down your order or bringing the services in-house, but this is unlikely to yield large-scale savings in most organisations. Non-renewal of lease-hire and service contracts may or may not be a feasible option.

If you operate from multiple sites, there may be potential savings from reducing the number of sites – or simply finding cheaper premises, but the terms of your lease may mean that this is not a quick solution.

For most service organisations, the main cost is staffing, and sadly this is the one area which is both under your control and able to deliver rapid and significant cost savings. As trustees your primary responsibility is to your beneficiaries, so whilst trying to be a considerate employer you cannot refuse to contemplate redundancy.

If you have lost funding because the contract for your service has been awarded to another provider, then staff may be entitled to transfer to the new provider under TUPE rules. Likewise in the case of merger, although if both merger partners are seeking cost savings, then this will offer limited staff security. TUPE rules do not prevent redundancy due to restructuring.

Some staffing decisions are straightforward: for example, a front-line post which is a direct cost of a project that has lost its funding is likely to be unsustainable. However, most management and administration posts are likely to be treated as indirect costs, funded by contributions from a number of different projects. If you have lost a lot of project funding, you may need to consider a “flatter” management structure, cutting out some or all middle management posts that you can no longer afford.

Focus initially on the staff posts that you are going to need rather than on individual staff members. If necessary, adopt a revised staffing structure. You will then need to operate a fair selection process to fit the individuals to the posts.

Before embarking on any restructuring process, it is absolutely vital to consider the serious legal implications in relation to redundancy.

Another consideration is asking workers to change their working hours. However, a change to a worker's working hours amounts to a change to their terms and conditions of employment. As such, you need them to agree to it.

Before changing any of your employees' contracts it is important to check exactly what is in the original documents and consult as far as possible with your employees.

Every project plan is a triangle
The success of a project will depend critically upon the effort, care and skill you apply in its initial planning. Using the Every Project plan is a triangle will help you to plan your project