Firstly, I was impacted by the layoff. I have over a decade of experience in corporate finance and have analyzed every aspect of the P&L in that time. At CVS one part of my role was expense analysis for my area.
Laying people off is the worst failure. Why?
Any good finance person would know that there are multiple levers to pull on the expense side to save money. The expense side of the P&L is the most important side of the P&L for that specific reason: it’s really the only side a finance person can impact. Finance people can’t impact sales or revenue: that’s entirely dependent on the sales team. My CVS boss was a CFO level and didn’t even understand this basic concept, which was very sad.
Now, what could have been done?
Supplier/Vendor management: analyze all vendors by cost, switch over to more affordable vendors that provide the same thing when possible. Also, cut vendors that aren’t critical. This process, if done correctly, would probably have saved the $500M alone across the company.
Travel freeze: no travel allowed except for sales people and some executives.
Real estate management: sell off some real estate that is no longer being used, or sell expensive buildings and switch to cheaper leases in the same area.
Capital expenditure management: cut in all areas unless business critical
Accrual management: release all accounting accruals that are no longer needed or not critical.
I could go on but don’t want to bore people. So, why did they eliminate people instead of doing the above? Laziness and time.
Getting rid of people is easiest and fastest. But it isn’t the best thing for a company. It’s actually the worst.
However, the rich people padding their pockets in the company don’t really care about that. All about the now for them. Even if it means destroying the company in the future.