Most leaders are making snap decisions with cost-cutting in mind—but be warned, research shows that over a third later regret it

It’s why Google, Amazon, and Facebook have all taken drastic action to reign in costs, including scaling back on perks and mass layoffs.

But with the prospect of the economy bouncing back to kinder times, it would be short-sighted to burn furniture to heat the house, as the saying goes.

Yet there is evidence that leaders are doing exactly that—and already wishing they hadn’t.

Orgvue, the workforce planning software platform, interviewed over 500 leaders from global organizations with over 3,000 employees to find out how well they’re juggling the current economic climate with long-term success.

Confronted with rising inflation, sluggish consumer confidence, and the increased cost of goods, most of the leaders surveyed (93%) admitted to making snap decisions with cost-cutting in mind. 

But before jumping on the bandwagon, beware: Over a third of them (38%) already regret it. 

Don’t live to regret rash decisions

Orgvue’s research consistently shows that drastic cost-cutting measures take a toll on the future prosperity of a business.

The leaders surveyed listed efficiency, productivity, and growth as their top priorities in the next 12 months. But in hindsight, their knee-jerk reactions to economic uncertainty have been counterintuitive.

In the aftermath of making such snap decisions, around a quarter of the businesses said, they were hit with low levels of employee engagement, operational efficiency, and productivity.

One of the main reasons leaders went on to regret cost-cutting measures taken, such as layoffs, is that they soon realized that they had lost valuable talent that they needed.

To add to that, even though the business’s balance sheet may have momentarily looked healthier, most of them experienced some levels of reputational damage.

Around two-thirds of those surveyed confessed that the cost-cutting decisions they made were later viewed negatively by the organization.

To make matters worse, research has shown that a bad reputation can wreak havoc with share value, engagement, and talent attraction when left unchecked.

Instead, make data-led long-term decisions

Despite having weathered persistent disruptions over the past few years through quick-thinking moves, most of the leaders surveyed still have a negative outlook for the future of their organization, with growth a top concern.

The research suggests that this points to poor prioritization from the top and the need for decision-makers to better read the macroeconomic data and predictions available before taking action. 

Orgvue’s CEO Oliver Shaw echoes that “moving too quickly without the right information and planning risks damaging the business.”

“It’s important that leaders pause to reflect on and respond to changing conditions throughout the year,” he says. “Twelve-month planning cycles are a thing of the past and businesses should use all the tools at their disposal to avoid rash decisions.”