The Cost of Cutting Costs

Every year I spend some time (far less than I should) in Shetland, a Scottish island (there’s about 100 of them in total, 16 inhabited) just 177 miles from Norway. Yes, that TV series… I stay in a house that looks out at a bridge between islands. The bridge is only 54 years old. I always wonder during my many hours of staring at the sea: how did they manage before the bridge? There are still some ferries to pop in and out of the main islands (weather permitting). They are the only “bridges”.

Those bridges and ferries have been stuck in my memory.

You can reduce the cost of maintaining a bridge between two islands by demolishing the bridge.

The accounting is impeccable. The consequences are another matter.

This, in essence, is what many organizations do during restructures. Faced with economic pressure, investor expectations, merger integration targets or the latest efficiency program, they begin removing people. Layers disappear. Departments shrink. Headcount targets are met.

The bridge is gone. The savings are real. The damage often remains invisible until much later.

Let us be honest. Redundant structures have always existed. Well-paid occupants of what can only be described as non-jobs have always existed. Not every role deserves to survive. Not every organization chart deserves preservation.

I have witnessed restructures where dire predictions never materialized. The organization survived perfectly well. Some houses do not fall down when walls are removed. Others never recover.

The problem is not restructuring itself. The problem is the astonishing blindness with which restructuring is often conducted. A layer here. A department there. Fifty people from this function. One hundred from that one.

The unit of analysis is almost always the same: headcount. Rarely braincount. Almost never network count. In the arithmetic of restructuring, a body is a body.

Whether that person has fifteen years of accumulated experience, or one year of experience repeated fifteen times, is rarely part of the equation.

The question is usually not: What capabilities are we losing? What knowledge is walking out of the building? What relationships are being severed? The question is whether the numerical target has been achieved.

People become numbers occupying boxes.

Yet organizations do not function because boxes exist on organization charts. They function because thousands of connections exist between people.

Some individuals possess deep technical expertise. Others carry institutional memory accumulated over decades. Others are trusted by everybody and formally report to nobody important. Some connect departments that barely speak to one another. Some quietly solve problems before they become crises.

Many of these people are invisible to the restructuring process precisely because the restructuring process is looking for costs rather than capability. Ironically, they are often among the least visible and most valuable assets in the organization.

A finance spreadsheet cannot easily see trust. An organization chart cannot see influence. A restructuring committee cannot easily see the person who knows exactly who to call when something breaks.

Yet these invisible connections are often what make the organization work.

Cost and capability are not the same thing. Unfortunately, many restructuring programs behave as though they were. An organization can reduce its payroll without becoming more productive, just as a patient can lose weight without becoming healthier.

Remove enough of these connections and the structure may remain standing while the capability disappears. The organization becomes something like a city whose roads still exist but whose traffic no longer flows. This is particularly evident during mergers and acquisitions.

I have lost count of how many integration programs still operate according to the primitive logic of “one of mine, one of yours”. One manager from Company A. One manager from Company B. One department retained. One department removed.

As though symmetry were a substitute for intelligence. As though fairness automatically produces effectiveness.

Meanwhile, nobody asks a more important question: Through whom do information, trust, influence, and collaboration actually flow?

The organizational fabric is disrupted with eyes closed.

The architects of these programs would strongly object to that description. They would point to governance structures, workforce planning exercises, and detailed assessment frameworks.

Yet the reality is often painfully simple. The numbers game wins.

What makes this particularly frustrating is that we now possess tools capable of making the invisible visible.

For years, Social Network Analysis has allowed organizations to identify connectors, influencers, brokers, and trusted experts who sit far beyond the formal hierarchy.

Today, AI dramatically increases those possibilities. Networks can be mapped. Critical connections can be identified. Alternative restructuring scenarios can be simulated before damage occurs. Potential losses of influence, collaboration, and knowledge can be anticipated rather than discovered months later.

In other words, we no longer have the excuse of ignorance.

No technology can eliminate the difficult choices involved in restructuring. Cost pressures are real. Competitive pressures are real. Some organizations genuinely need to become smaller.

But there is a profound difference between surgery and amputation. One seeks to preserve function. The other merely removes mass. Too many restructures still resemble the latter.

The tragedy is that organizations often celebrate the savings while unknowingly dismantling the very capabilities that made those savings possible. The bridge disappears from the balance sheet.

Only later does somebody notice that the islands can no longer talk to each other. And by then, rebuilding the bridge is usually far more expensive than maintaining it would ever have been.

When you cut people, you may be cutting relationships. When you cut relationships, you may be cutting capability.

The things that make organizations work are often the very things organizations fail to measure before they remove them.

Maybe a standard question should be: “Are we saving money, or are we demolishing a bridge?”

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