Where do companies most often make mistakes?
According to Jitka Tejnorová, the biggest problem is poor communication and the lack of a long-term strategy. “Companies often announce restructuring but forget to explain it to employees. They then start to imagine the darkest scenarios, which leads to talent leaving,” she points out. Moreover, when a company stops all investments and internal processes, it enters a “crisis waiting” phase, which can be much more destructive than the savings themselves.
The most common approach to cost reduction is wage cuts and layoffs. “This is the fastest, but also the least thought-out solution,” says Tejnorová. “Wages need to be reviewed regularly to reflect the actual needs of the company. For example, if we merge two positions into one, that person can’t have the same salary as before or it will soon lead to them leaving.”
Companies should therefore always consider the long-term consequences of austerity measures. Cuts in the wrong places can lead to higher turnover and rising costs for overtime or training of new employees.
Can cost-cutting be effective?
Properly managed cost optimization is possible if the company proceeds systematically. “The most important thing is to first map all processes in the company and find out where waste is occurring,” explains Jitka Tejnorová. “In many organisations, it is possible to save 15% to 20% of labour costs without having to make redundancies – we often pay people for activities that are no longer needed or can be automated.”
Japanese companies, especially those tied to the Toyota Production System, have crisis plans in place. They analyse the market continuously and know how to respond to a drop in demand without panic cuts. In contrast, many Czech branches of foreign companies are being pushed into savings by their parent companies without being prepared for them. “The result is often chaos, uncertainty and the loss of key people,” adds Jitka Tejnorová.
How to manage reorganisation without losses?
The key to a successful restructuring is thorough preparation and clear communication. Jitka Tejnorová recommends the following steps:
- Revise the wage system – instead of across-the-board cuts, analyse whether wages correspond to the real value of work.
- Optimise processes – remove unnecessary activities and look for opportunities to automate.
- Stabilize key employees – involve them in change so they feel they are part of the future of the company.
- Communicate properly – employees should know what is happening and why to avoid speculation and departures.
The HR department in particular plays a crucial role in the restructuring process. “HR must be the first to come up with tools to stabilise employees. It is not enough to wait passively for management to come up with a plan,” emphasises Jitka Tejnorová.
According to her, companies often focus only on departing employees, but forget about those who stay. “People who survive a wave of layoffs take on more work, are expected to perform better and often feel insecure. If they are not given a clear signal that the company is counting on them for the future, they may leave too – and that is no longer a managed process, but an uncontrolled loss.”
Crisis plan as a necessity
Companies should approach cost optimization with a long-term vision. Quick fixes, such as across-the-board cuts, often pay off in the form of higher turnover, employee dissatisfaction and a drop in productivity.
“Organizations that have a restructuring plan in place and communicate it clearly and comprehensibly can implement cost-saving measures effectively and without losing competitiveness,” concludes Jitka Tejnorová.
Tomas Pospíchal: Today’s guest is Jitka Tejnorová, founder and managing director of DMC Management Consulting and TWI Master Trainer. In our last interview we talked a bit more broadly about your career and the story of DMC, but this time I would like to talk to you about a specific and especially topical issue. It’s corporate cost savings, cost optimization, restructuring. There is a lot of talk about them, but I would be interested to know how you see it from your position as a supplier of corporate services. Is it reality, Jitka, or is it media hype?
Jitka Tejnorová: I think that reality comes primarily from the media, but of course the main driver of our economy is the automotive industry, which has been showing or reporting a certain decline for a long time. That means that I’m already seeing a decline in orders from our clients. On the other hand, I also read that our economy has had record exports since 1989, for the last few years.
Tomas Pospíchal: I’ll jump in. This is the first quarter of 2025 when we record this podcast.
Jitka Tejnorová: Yes. That means it’s a bit of a paradox. The Czech economy is growing, Czech companies are doing well. I also perceive that Czech branches of foreign companies are really successful here in the Czech Republic and are generating profits. Of course, they also perceive the drop in demand and the cost savings will come and everyone is preparing for them at the moment.
Tomas Pospíchal: Are there any common practices where and how companies are starting to cut costs? When we talk about HR, obviously personnel costs come to mind.
Jitka Tejnorová: Of course, personnel costs are a huge part of the company’s costs. That means that it is the first expense that the company focuses on. Outside of material costs, but that’s a slightly different category. For those personnel costs, I think the basic approach should be – and it’s not always the case – to look at the whole structure that builds on each other.
This means that when I need to cut personal costs, I change the company’s strategy. I have to look at the organizational structure, at what kind of people I need in the new organizational structure – let’s say a narrowed structure. I have to look at the processes and the systems in which those people work.
At the same time, I’m going to change the skill requirements of those people. So, for example, if I merge two positions into one, the one new position must have completely different competencies than the previous two. This means that the skill requirements change, and with that, the leadership style requirements change. This means that how I manage the organisation in this change must reflect the new demands on managerial skills. And all of this together will change the overall company culture.
Tomas Pospíchal: So cost savings is not just about cutting positions, but the whole way the company operates has to change?
Jitka Tejnorová: Exactly. If we were just laying off people without any change in the way the company operates, we would just cut heads, but the activities would remain and people would be overworked.
Tomas Pospíchal: What does it look like in reality? How does management, middle management, for example, have to change their behaviour or work?
Jitka Tejnorová: It starts with top management. Top management is the first to change their management style. They have to clearly declare what the vision is, what the strategy is, where we are going. Unfortunately, middle management is often affected by these changes as well. Often not only positions are cut, but entire levels of management are cut – which I think is a big mistake, because it creates a vacuum that no one can fill.
Tomas Pospíchal: And what does this mean for the HR department?
Jitka Tejnorová: It’s more work for the HR department, of course. For one thing, you need to take care of a group of people who are leaving. If the company wants to maintain its reputation on the market, it needs to work with so-called outplacement. This means that we try to help these people find new jobs in different ways.
At the same time, it is necessary to stabilize those who remain in the company. On the one hand, these people lose their security, on the other hand, more work falls on them, new performances are expected of them, and at the same time their colleagues, with whom they were somehow connected, leave. This means that there is a risk that the employees we wanted to keep will leave the company with those who are leaving. HR thus faces the dual pressure of stabilising existing employees and recruiting new ones, even though the company has just reduced its workforce.
Tomas Pospíchal: You say that HR has to stabilize people, but isn’t that more the role of management than HR?
Jitka Tejnorová: HR should be the first signal that comes with help. In such situations, management focuses primarily on organisational changes and tasks related to restructuring, so they often underestimate the mood in the company. This doesn’t mean that management is inattentive, but they are simply dealing with other priorities at the time. Therefore, HR is the department that should be actively monitoring the situation and coming up with tools to help management manage the crisis period.
For example, we hold workshops where we create new processes and systems with key employees. In this way, we not only stabilize employees, but also show them that the company is counting on them.
Tomas Pospíchal: Do I understand correctly that HR must also focus on changing the competences of employees?
Jitka Tejnorová: Yes, it is part of change management, the so-called change management. When we say “change”, we have to remember that change in a company is not only organisational, but also psychological. Employees perceive change primarily as a threat. And fear is one of the strongest human motivators.
People don’t tell you, “I’m afraid of what’s going to happen,” but they carry that fear and act on it. That’s why it’s crucial that an organization has a clear plan for communicating change and helping employees cope with it. This is where agile management or Toyota Kata methods come in handy – an approach that is used not only in the automotive industry but also, for example, in IT project development. Restructuring a company is essentially a project – and if it is managed methodically and systematically, chaos is minimised.
Tomas Pospíchal: You say companies should have a plan. Do they have one? Or do they usually react only when the situation arises?
Jitka Tejnorová: That’s different. I usually divide companies into two groups – Japanese and others. Japanese companies, especially those close to Toyota, have crisis plans prepared for the long term. They know what they will do in case of a drop in demand because they are constantly monitoring the market and analyzing the risks. In contrast, many Czech branches of foreign companies operate in a “react only when we have to” mode.
For example, a company ends the year in profit, but the parent company still decides to cut costs. Then confusion ensues because no one was prepared for it. The first step companies often take is to stop all investment – which, paradoxically, can make the situation worse. People become stressed, the best people start looking for new jobs, and only after a few months does the company start to plan systematically.
Tomas Pospíchal: You mentioned that cost cutting is not just about wages. What does that mean for employee remuneration?
Jitka Tejnorová: Many companies think that by reducing labour costs they will solve the problem. But it’s not that simple. Wages should be reviewed regularly and reflect the current needs of the company. For example, if I merge two positions into one, the person who takes over the job cannot stay on the same salary. Otherwise, it’s easy for me to save money on wages but then see overtime and turnover costs rise as people leave. Therefore, part of the restructuring should include a review of the payroll system so as not to incur further unwanted costs.
Tomas Pospíchal: Do you see in practice any common mistakes that companies make during reorganization?
Jitka Tejnorová: Yes, the biggest mistake is poor communication. Companies announce changes but don’t talk to people. As a result, employees start to invent catastrophic scenarios and act on them. Some start actively looking for a new job, while others try to “save” in the wrong places. Instead of systematic optimisation of processes, companies are faced with chaos.
Tomas Pospíchal: How can this mistake be avoided?
Jitka Tejnorová: Companies should regularly review their processes and optimize them before a crisis occurs. Processes tend to swell – they start simple, but gradually build up more and more steps until they become inefficient. If a company doesn’t regularly review them, then in a crisis situation there is nothing to build on and the changes are much more painful.
Tomas Pospíchal: Finally – if you were to give a brief manual for HR at the time of the reorganisation, what would it look like?
Jitka Tejnorová: Start with a review of the wage structure and see if savings can be made without having to make redundancies. Next, analyse the processes and simplify them. Look at what competencies will be needed and create a plan to stabilise key employees. And of course – communicate, communicate and communicate some more.
