Secondly, since "cost-cutting" is the accepted corporate mantra for today, many people are simply cutting costs by cutting activities. This is hardly the prescription for preparing for good times when it comes. Thus, in the name of going lean, not merely fat but also muscles, and sinew and sometimes even the bones are getting cut.

The response formulated is a sure prescription for prolonging recession, not combating it. If drop in demand has been identified as a cause of recession, then efforts should focus on how to reviveand increase demand. Instead, most people are cutting down activities, in tune with the reduced demand, in an effort to save costs. How, exactly this will help revive demand is difficult to fathom.

As the title of this article postulates, the focus must change, from cutting costs, which is an across the board sweeping step that cuts out both the good and the bad, to elimination of waste, which will not only cut costs but also make the resultant output more efficient, and less costly. This may be possible to help sustain, revive and eventually increase demand.

What are the cost cutting measures that industry is taking? Cut manpower, cut all capital expenditure, suspend all maintenance and renovation/ rectification activities, cancel all training, downgrade travel entitlements, stop/reduce entertainment allowances; etc.

Let us look at a few of the above examples and see the ramifications, in actual practice. Take the case of cutting down travel entitlements in respect of class of travel. Managers who wereentitled to travel by air are being asked, in many companies to now travel by rail. This, of course, saves money but it also takes more time and very often travel has to be re-scheduled as train tickets are not easily available at short notice.

So how do you judge the "money-saved" due to travel by train vis-a-vis the additional cost incurred due to delaying a particular meeting or the manager being away for a greater period from his place of work owing to the obviously longer time spent over train travel.

So instead of focusing on costs and downgrading the "class of travel" to save money, the effort should be to cut waste and examine, de novo, whether the travel is at all required.

I am reminded of a story that a friend of mine who is an executive director in a large petro-chemical company related to me about an incident in his company. A proposal came to the board for approving the purchase of some 20 motor-cycles of a particular brand for its sales representatives. Another cirector who apparently wasfairly knowledgeable about motor-cycle felt that some other brand would be a better buy. After considerable debate spread over two meetings the best "cost-feature" combination product was chosen and the purchase approved. However, my friend mentioned that nobody questioned "whether the motor cycles were at all required or why they had become necessary all of a sudden now". This is a classic example of cutting costs while letting waste continue.

Similarly, let us consider the question of maintenance of plant and machinery or buildings or some piece of office equipment. At times like these there is a knee-jerk reaction across the organisation to stop all such expenses; very often "strict circulars" are issued on the subject, warning of dire consequences in case of violation. A little reflection will show how short-sighted such an approach is.

Building collapses/industrial accidents, many with fatal consequences, are living examples of the consequences of "cutting costs" by delaying/avoiding essentialrepairs.

What about training? There seems to be complete unanimity in corporate India on this issue for the past one year -- this is not the time for training. Surely we cannot spend money on training when we are passing through difficult times. Indeed, this proposition is considered so self-evident that there is actually an expression of surprise bordering on irritation when there is a suggestion for training.

This approach, however, misses the essential point that difficult times demand new responses and some of these responses can only be crafted if you are trained for it. It enjoins upon the organisation to come up with new approaches rather than trying more of the classical/regular methods that have so far been used to. This is only possible if people "unlearn" their past solutions and "learn" new methods for which, training is one of the important tools. As has been said very succinctly, if training your people is costly, not training them is even more costly.

The other advantage of continuingwith training in these times is that people are actually available for undergoing training uninterrupted as contrasted with normal times when the person who requires training or who would benefit most from training is `never free' and therefore people who finally get sent for training are not the ones who need it but who are "available". Now that the right people are "free" for training, training itself is being suspended. We are being inundated today with chairman's speeches replete with words like vision, the new millennium, global competition, challenging markets, fierce competition, "people are our true assets" and suchlike. However when it comes down to "building up these true assets to world class capabilities" everybody seems to believe that "not training" them is the best way to help them develop. Innovative thinkingindeed.

The issue is really not all that complicated. If you have a cash flow problem, no doubt you have to cut expenses. If you have an earnings/surplus problem, no doubt you have tocut expenses. The important question is what must you cut? What should be hacked first, and what must SI avoid cutting or putting off?

When your approach is "cut costs", it is a general advice that allows people to show results and earn kudos by cutting anything, since any cut in any activity will inevitably cut costs.

On the other hand, if the approach is "cut waste" then only the flag gets attacked; the muscle and the sinews and the bones remain, leaving the organisation lean and fighting fit after the exercise.

In the process, you may actually generate a surplus that allows you to compete more aggressively in the market place and prosper even in these recessionary times. In any case, it tones up the organisation, significantly improves morale, and makes you better prepared for tomorrow.

There is, yet another implication of the "cut costs approach". As mentioned above, this approach of cutting costs is being taken "because times are bad"; this is the reason that is being cited as the justificationfor the cost cutting & stringent expense control approach. Under these circumstances, even if some wasteful activities get temporarily suspended, the unstated assumption is that when times are better, we will restore all the cost cuts; in other words resume our wasteful practices also.

On the other hand, when you focus on wasteful practices, you are clearly identifying and eliminating practices that will never be allowed to come back. This is a permanent gain for the organisation. Of course, you will also be achieving significant cost cuts or, what I would prefer to call, cost savings, which are really bottom-line earnings.

It is time, therefore, that if we wish to compete globally, we take this recession in our stride, since such business downturns will come again and again. Instead of panicking and responding defensively, let us utilise this opportunity not merely to lose weight by cutting costs, but to grow muscles by cutting waste.