Cost Center OR Value Engine? You must Lead the Conversation!

A 20% cost reduction isn’t a tweak—it’s triage. We unpack what leaders can do when the email lands and the room goes quiet: how to spot the warning signs before the meeting, protect non-negotiables like safety and compliance, and turn “overhead” into measurable value. Along the way, we share raw stories of being told to “write down a name,” the shock of realizing payroll is at risk, and the pivot from fixing lights to quantifying savings. The goal isn’t survival theater—it’s smart, targeted cuts that stabilize today without mortgaging tomorrow.

We walk through a simple framework: define what must never be cut, identify where reductions won’t cripple operations, and channel scarce capital into short-payback investments that shrink energy and maintenance costs within months. We talk zero-based budgeting without the fantasy, explain why flat cuts accelerate failure, and show how to model scenarios that make tradeoffs visible to executives. Most of all, we emphasize communication: honest updates that respect legal limits, weekly proof of savings, and the credibility that keeps teams aligned when fear runs high.

There’s a human heartbeat to all of this. Talent leaves first when signals turn red, so we outline minimum staffing thresholds and why leaders sometimes need to grab a wrench to keep service levels intact. We explore career readiness—building skills and networks before the storm—and making the call to stay and lead or exit with integrity. Data is queen, cash is king, and leadership is the discipline of protecting both without losing the people who make the mission work.

If this conversation helps you lead with clarity under pressure, follow the show, share it with a colleague who’s facing cuts, and leave a review so others can find us. Your stories and questions guide future episodes—send them our way.

Transcript

Setting The Stakes

SPEAKER_01 0:13

Well, hello, and welcome to our podcast, Success, Secrets, and Stories. I'm your host, John Wondolowski, and I'm here with my co-host and friend, Greg Powell. Greg? Hey everybody. And when we put together this podcast, we wanted to put out a helping hand and help that next generation and help answer the question of what does it mean to be a leader? Today, we want to talk about a subject that I think supports that concept. So today we're going to talk in this podcast about a subject that people usually don't want to talk about. You get this message coming in on your email that you're invited to a meeting and they're going to talk about a potential 20% reduction of costs. Now, what do you do? Today we're going to dive into the topic that, you know, is it's clearly uncomfortable and sometimes fearful. And request for 20% reductions is one of the toughest pills that you'll ever have to swallow in management. If you've ever been part of the conversation, you know how massive that is in order to create a cut that deep. In my career, I have never seen a budget increase more than 3 or 4% per year until the company was in trouble. You want to be prepared for these conversations beforehand. So understanding how people evaluate whether you're productive or not is really how you grow the data to have this conversation. In my world and facilities, it was how many square feet do I have in operations? How many people necessary per square foot do I need? And rarely does a budget grow so that you understand that that cutbacks are significantly more than increases to any budget. It's just not apples to apples. It's apples and watermelons. That's just the way it is. Many organizations suddenly need to reduce the 20%. And it's not a minor adjustment. It's a sign that there's something fundamentally wrong with the organization. They're basically in trouble. They're looking for what is considered non-essential services to carve out the largest chunks they can for savings. And here's the frustrating part. In my world, in my previous experience and in positions I had, facility maintenance construction was not a critical department. MIDI organizations consider those departments as support services, not core business. They're willing to sacrifice the department and minimize the department's ability to perform to buy time, to fix whatever's dragging down the overall organization.

Metrics That Matter

SPEAKER_00 3:10

So, John, you and I have talked about this before. How challenging those reductions are for support service departments, those back office operations. How did you handle it the first time you faced a 20% cut?

SPEAKER_01 3:24

Yeah, that's such a raw memory. But be honest, I didn't do well. The first time I was asked to reduce my budget by 20%, I had already spent two years redefining and tightening up the budget and doing everything I could to squeeze the dollar. And in earnest, I gave them the most responsible budget I could. So when they asked me to reduce my staff by 20%, I told them that my entire staff consisted of four people, and that included me. And then the next sentence that I will never forget, my manager looked me straight in the eye and said, if you can't put down a name to reduce in terms of staffing, write down your name.

SPEAKER_00 4:08

So, John, something like that happened to me as well. It definitely got my attention. I'm guessing that got your attention too. And I'm also guessing you didn't put your own name down on the list. Yeah.

Support Services On The Line

SPEAKER_01 4:20

Well, Greg, to be completely honest, I actually considered it. I hesitated long enough for my manager to notice, and he quickly clarified that he didn't want me to quit. He was simply being transparent on how dire the situation was. The organization was close to missing payroll. And if he didn't cut costs immediately, the doors were going to close. So he gave me an opportunity to rethink it. And I gave him the name of the most recently hired individual. And I felt awful for the rest of the day. It was truly the first time I understood the human cost of a failing organization. And when you're asked to cut 20% of your staff, it's not a strategic adjustment, it's a desperate act. And if you didn't see the warning signs before the meeting, you're walking around with blinders on.

SPEAKER_00 5:15

So, John, how can someone recognize that the organization is in trouble? Especially if it's like a privately held company. Public companies have stock prices as indicators, but private companies are harder to read. Yeah.

SPEAKER_01 5:29

You know, to be honest, whether it's a public company or a private company, there is always data-driven indicators that show financial health to the organization. It can be annual reports, it could be tax filings, internal performance summaries. Those documents exist because organizations must report their financial performance to somebody, to shareholders, to board members, to lenders, to regulatory bodies. The problem is that early in my career, I didn't understand the value of these reports. I didn't know that they were available or how to read them, to be honest. I didn't really have the tools in terms of research that we have now with the internet in 2026. So, yeah, the equations change, but the old analogy still works. Do your homework. You're an adult. No one's going to do it for you. No one is going to be there to try to prompt the questions that you need to ask. If you don't understand how the company is performing, ask. It's on you.

A Hard First Lesson

SPEAKER_00 6:34

Okay. So let's say someone didn't do their homework. They accepted a job without understanding the organization's financial strength or a weakness. That's in the past. What do they do now? Okay.

SPEAKER_01 6:47

First, the cuts usually almost always the same, how they usually start out. They cut book and magazine subscriptions. Membership and organization fees are eliminated. Office supplies are either reduced or eliminated. Training programs are off the table. Travel is off the table. And of course, there's a hiring freeze. But here's the truth. By the time leadership asks for staff reductions, most of those cuts have already happened in that prior year. The real challenge is understanding how budgets are built and what drives operating costs. Payroll is almost always the largest line item. And in many industries, energy costs are the second most expensive element of an operation. But leadership usually goes for the 20% reduction for payroll first. They're not asking a question in terms of creativity. They're just asking for a way to get the organization to survive. Organizations try to avoid cutting the heart of the business, which is sales and marketing and customer-facing operations, because those functions technically generate revenue. When a company is in trouble, they need every ounce of creativity to take advantage of their sales force that they can muster in order to try to pull themselves out of trouble. The challenge really comes down to being in the back room or support services, because it's hard for a cost center to show value when you're dealing with the trouble of payroll. Unless you're actually adding to the kitty, you're basically taking it out. And the pressure lands on you as a leader.

SPEAKER_00 8:38

So the reality here is that you need to reduce costs. Leadership means doing more than just simply cutting staff. So we have a few strategies that leaders can use. Number one, conduct a thorough audit of all expenditures to identify possible inefficiencies. Number two, define core functions and identify non-negotiable activities, things that just have to be done, that drive revenue to fulfill the mission. Number three, engage those department leaders so they can help identify potential savings in their areas because they know. Number four, model multiple budget scenarios to understand both short-term and long-term impacts. Something to compare something against. And five, execute and monitor changes to ensure internal controls tighten and cost reductions actually do occur.

SPEAKER_01 9:35

So you and I have both been through the MBA world, and that list is right out of the MBA experience that both of us have had. And there are parts that most leaders underestimate that is really important at the same time is transparent communication. After the first painful experience, I made a commitment. I would never again allow my department to be seen as only a cost center. This is preventative so that people will be educated on what I do when we're having the discussions about reducing staff. I focused on demonstrating how our work reduces energy costs, improves efficiency, and protects the organization's assets. Instead of talking about fixing lights and repairing floors, I talked about how much money my team saved the organizations every year. I reframed the narrative from maintenance to operational efficiency.

Reading The Warning Signs

SPEAKER_00 10:35

So, John, that's brilliant. What you really did was reposition your department as a value generator, not just a cost center, right? That's very smart. Because if leadership sees that cutting your staff will actually increase costs somewhere else, they'll think about it twice.

SPEAKER_01 10:50

Exactly. And I want you to leave to pick up, if anything, from this podcast, this central point. Data is queen and cash is king. And I learned that you need to understand the budget detail conversation before a financial crisis is an issue. When organizations start looking for cuts, the first place they're going to look is support services where I was working. And if you don't, if you aren't ready for that conversation to basically show what your value is to the organization, you're too late.

SPEAKER_00 11:25

But we've been in situations where everyone has to share in the pain, even if you can justify your department's value. Sometimes organizations still mandate those cuts. I'm sure you've had moments where all your work demonstrating cost reductions still didn't protect you from a company-wide 20% staff reduction. Absolutely.

Typical Early Cost Cuts

SPEAKER_01 11:48

When an organization is on the brink of bankruptcy, there is very little patience for the nuances of how you can develop a department. They're looking for cuts and they need them now. And it's basically survival. It's not optics. They're no longer dealing with the best business model. They're just trying to make sure that if they're going to take a loan out to cover payroll, they're not asking for more than what they need to get to cover payroll. When you're in that kind of environment, most professionals are quietly updating their resumes. That's just the real world. The writing on the wall is happening right before your eyes. You can feel it. The organization in the hallways has that feeling of the tension that's happening. Leadership in their meetings and the tones of their emails change. Everyone knows the organization's in trouble. And yes, you and I have talked about this exact situation years ago. And I remember calling you for advice.

SPEAKER_00 12:51

And I remember that call too. But here's the thing we actually learned from those moments. You had already demonstrated your skills and professionalism. We both knew you would land on your feet. The real question was whether you should stay and lead your team through the crisis or begin preparing your exit. These are two different responsibilities.

Payroll Pressure And Tradeoffs

SPEAKER_01 13:13

And you know, just to get off track for one second, I needed a friend at that point to talk because I was desperate in terms of what do I do. I had a network of friends that I would ask and bounce ideas and make sure that I'm making a good decision. And you helped me a lot during that time. And it's a valued friend that I really appreciated the help during that situation. When you're in the middle of these kinds of cuts, it's hard. It's hard to keep your clarity. It's hard to see the force from the trees. So I wanted to thank you for that. And we've both been in that situation, though, at the end of the day. I've stayed and led teams through incredibly difficult times. And I've also recognized when it was time to go. Those are not easy decisions. They are hard to generalize in this podcast, but you know that you're in that situation and the chances of recovering versus the company simply not going to make it are what you need to be looking at. The organizations are more transparent than people think. Either there's a situation of dire or there's a situation of hope.

SPEAKER_00 14:27

So for today's episode, let's assume the situation is hopeful. The organization is struggling, but it's not about to collapse. You need to work with leadership to cut your operating budget as much as possible. How do you prioritize those cuts strategically?

From Cost Center To Value

SPEAKER_01 14:44

Yes. Well, the first step is to avoid the trap of making cuts across the board. A flat 20% reduction across every line item can cripple an organization and accelerate its failure. Leaders need to be working with intent. They need to understand what they can reduce and where the limits are before the organization becomes nonfunctional. Let's put our MBA hats on again for a moment and talk about strategy. So, first thing is to identify what is absolutely critical. These are the functions that cannot be cut under any circumstance. For example, in a facility management world, state law may require a licensed boiler operator to be on site for a high pressure boiler. That's not negotiable. Two, identify areas where reductions won't compromise core operations. In facilities, they might be reducing landscaping frequency, scaling back and cosmetic maintenance, displaying non-essential upgrades for capital equipment. As long as these cuts don't affect safety or compliance, it is something that will reduce the aesthetics or the convenience of services, you can reduce those services. Evaluate projects strictly on return on investment lens. And what I mean by that is return on investment is the core of how a business actually grows. And whenever they're desperate, it goes from how many years for return on investment to how many months for return on investment. If you have something that has three months or six months, you really should be doing those projects because it matters. And those are the kind of investments with whatever capital you have that will give you something back more than just standing the way that it is, the steady course. And then I think you should always do a zero-based budget at least once. And I laugh because it's a wonderful education moment to go through and actually develop a zero-based budget down to the nuts and bolts that you spent over the past year and what you project you're going to be using going forward. And I remember going through this exercise, and I spent three weeks, probably more like four or five weeks when I really think about it, to develop a zero-based budget. So I brought it to my boss, and it was a healthy increase in the budget. And he looked and said, Yeah, that's not going to happen. He folded the book that was, I don't know, like an inch and a half thick of the data that I had put together. He said, What did I give you for an increase last year? 3%. Okay, then you get 2% this year.

SPEAKER_00 17:46

Figure it out. So, John, let me guess. Is that the same manager, the same company that asked you to cut 20% of your staff?

Data Is Queen, Cash Is King

SPEAKER_01 17:55

Yep, same guy. But he wasn't wrong. I mean, the zero-based budgeting helped me understand my department down to the granular level. But it didn't reflect the historical patterns and replacement parts because it's the unpredictable nature of maintenance. Manufacturing environments are a little bit more stable and the cost and components are pretty much consistent. Facilities does not have that opportunity. Anyway, enough about my zero-based budget trauma. Maybe we can talk about something that is a little bit more productive in this kind of environment. Greg, you can talk about communication.

SPEAKER_00 18:31

Now let's talk about communication. That's definitely our favorite topic. Hard times demand transparency. Whether you're in leadership or on the front line, communication has to be both honest and consistent. There's kind of a fine line between telling people the truth and inciting panic, right? And there's an equally dangerous line between withholding information and just flat, outright lying. So once leadership loses credibility, cooperation evaporates. It wasn't easy to have that communication, but the reality that the members had and the management had, everybody got it. And because they were honest, we were able to work collectively, constructively together. So when a company is trying to avoid bankruptcy, any manipulation of data or truth will come back and bite you in the butt. If there are potential buyers or acquisition discussions, you don't have to reveal confidential details, but you can explain the legal limitations of what leadership is allowed to share. And most employees understand that.

Strategy Over Across-The-Board Cuts

SPEAKER_01 19:40

Yeah. And even with transparency, people are going to leave. When the company is in trouble, most of your talented people are often the first to leave. They have options, to put it simply. And the staffing levels are going to drop, and the remaining folks are going to have to pick up the work of either two or three people because there's a hiring freeze. Leadership often has to step up and help, which is a sign that everyone is feeling the pressure. But here's the real challenge. Organizations are not buildings, they're people. And once enough of talent leaves, the organization reaches a point where it can no longer function. Leadership must understand that there's a minimum staffing threshold. Below that line, failure becomes inevitable. Manufacturing, for example, if you eliminate your research and development team, you're essentially eliminating your future. Most companies don't survive that kind of reduction. To weather a downturn, leadership must understand and require a stable department that will retain the necessary talent in order to help the rebuilding process.

SPEAKER_00 20:54

You know, from a human resources perspective, this is why you should always be planning your career. Understanding the health of your organization is your responsibility. Preparing for change means building the skills, the education, and experience you need before you actually need them. The time to go back to school for a bachelor's degree, a master's degree, or PhD is not when you're unemployed. Right? These events will happen. Having clear career goals and a realistic understanding of your ambition helps you avoid being blindsided. So true.

Zero-Based Budgeting Reality Check

SPEAKER_01 21:28

And really, at the heart of this podcast is preparation, awareness, intentional leadership. That's the key. This isn't a fun subject, but it's a necessary one. Organizations face financial hardships. Leadership faces difficult decisions. We live through it. I've stayed and I fought through hard times, and I've also made decisions to move on. But here's what I want to leave you with. Even if you decide to leave, give everything you had until the Last day. Own it because the team deserves it. Those are the people that you've hired, that you've mentored, that you've believed in. I've even gone so far as to recommend people to replace me that are with the organization so that they have a chance for survival. The other point that I want to try to make as clear as I can is that we learn from our failures. And in 2026, jobs change, and that's just the reality. The jobs are going to be there today that are not going to be there in the future. And especially 20 years from now. As one of my bosses put it, change is good. It's just the way it is. And he was right. Embrace the change. And you'll find yourself stronger on the other side. So if you like what you've heard, I've written a book called Building Your Leadership Toolbox, and we talk about tools like this. And it's available on Amazon and Barnes Noble and other sites. The podcast is what you've been listening to. Thank you so much. It's also available on Apple, Google, and Spotify. A lot of what we talk about is from Dr. Durst and his MBR program. If you'd like to know more about Dr. Durst, you can find out on SuccessGrowthAcademy.com. And if you'd like to contact us, please send me a line. That's Wando75 periodjw at gmail.com. And the music has been brought to you by my grandson. So we want to hear from you. Drop me a line. Tell me what's going on, what you like, and what you would like to hear about. It has always helped us to create content. Thanks, Greg. This was fun.

SPEAKER_00 23:44

Thanks, John. As always. Next time.

SPEAKER_01 23:48

Yeah.