Question

Choosing Cost-Reduction Initiatives. The Springcrest case study provides the opportunity to explore possible solutions that illustrate sound fiscal management, and systemic improvements and choosing cost reduction initiatives.

The Situation:

Springcrest is in a precarious financial position, running financial deficits the past year and a deficit projected for next year. Below are several cost-reduction options to adopt with the goal of reducing the deficit.

Have all employees take a day off without pay.

Reduce all salaries by 5%.

Renegotiate contracts for equipment asking for more cost-savings.

Renegotiate interest rates on the existing mortgage with Neighborhood bank.

Renegotiate maintenance and lease contracts.

Increase employees’ share of health care insurance premiums.

Require employees to pay for health care insurance for dependents.

Reduce the employee benefit expense by replacing a pre-established number of full time employees with part-time (without benefits) employees.

reports your analysis of the Springcrest situation. Be sure to complete each of the following items:

Rank your cost-reduction choices in order by the magnitude with which they will impact Springcrest’s bottom line, from largest to smallest.

Discuss specific details the rationale for your prioritization choices.

Develop an implementation plan for the top three Initiatives you chose. Describe in detail the following:

What is the financial impact of your top three choices: Specifically, how much money would Springcrest save by implementing these cost-reduction choices?

How you would approach this implementation plan within the organization?

Who would you involve in the process?

Answer 1

Rank
1	Reduce the employee benefit expense by replacing a pre-established number of full time employees with part-time (without benefits) employees.
2	Reduce all salaries by 5%.
3	Renegotiate interest rate on the existing mortage with neighbourhood bank
4	Renegotiate maintenance and lease contracts.
5	Renegotiate contracts for equipment asking for more cost-savings.
7	Increase employees’ share of health care insurance premiums.
8	Require employees to pay for health care insurance for dependents.
9	Have all employees take a day off without pay.

Rationale for priortization of Choice :

Human resource are the most crucial resource of a organisation. Moreover, it is a expense which is to be incurred every month. So, if any cost can be reduced it should be cost of human resource because it will have a significant impact on the finances of the company for the long run.

3. Implementation Plan

1. Part time employees with no additional benefits can be hired. For this required notice according to the companies policy should be given to tthe full time employees.

further, availability and efficiency of the part time employees should be checkes before retrenching the full time employees.

2. For reducing wages by 5 % : It is a difficult job to agree the employees for the reduction of the slary. However this can be achieved by giving the future hopes and incentives that will be achieved when business will be in profit.

3. With regard to renegotiate of interest with the bank, we have to appraoch the bank with the financial condition proofs of the company. And have convience them understand that if such condition persisit company may not be able to survive and it will be a complete bad debt for the bank.

So, they should reduce the interest rate.