Maintaining a Cost-Conscious Business Plan
Question: How does Intel promote frugality?
Swope: Well, it’s establishing goals, right, which is the way we do it in Intel is we do profit-sharing. So, as we make more money, our employees make more money. We have an employee bonus and we set goals for the corporation every year. As we achieve more of those goals, we are able to, we have a variable pay structure so, again, another, right, excuse me, that employees make more money. So, first of all, we share their success, right. Second of all, people have to believe that it’s their company. It’s not a [matter] that they go to work for your company; they go to work for their company. If we are good enough, you know, in our work and the way we treat them for, it’s that if we treat them with the respect that they deserve, we give them the training they deserve, and in exchange we share our profits with them, then hopefully at least this is what’s worked out for us for our first 40 years. They have responded in kind by being careful with expenses, right. The other end of that spectrum is you have to audit, right, and you have to agree that you’ve got rules and compliance and all the mechanics of that and, you know, so, Intel is very good on, I think, hopefully, and our employees hopefully believe we’re very good at both ends in that.
Question: What is Intel’s strategy for cost-cutting while maintaining output?
Swope: If you’re in 8 businesses and you have to cut 3 of the businesses, then your output in the 3 that you cut is not going to be the same. If the topic is can we figure out intelligent ways to prune expenses such that the fundamental output of the corporation is at least minimumly affected, the answer is yes. I think that’s called good management. The other part of this is you have to know the timeframe. We invest in process technology, meaning how small we can make a transistor, you know many, many years in advance. We don’t vary that year to year. We know where we have to go. We understand it. Good times or bad, we have to invest there or our fundamental mechanism of running our company changes. So there are ways you can do with that or disaster, right, but I think you have to be pretty clear about what the timeframe is in those investments and I think that you have to continue to apply very prudent judgment about what is no longer just fundamentally essential.
Question: How do you decide to cut human resources?
Swope: We had to restructure the company a few years ago and we went from approximately 100,000 employees to approximately 83,000, where we are right now. That was incredibly painful. And we did a lot of benchmarking. We did a lot of work. We hired in outside consultants, and we said, while we are still making money, we need to understand how it is we got into the organizational situation that we’re in and what are we going to do about it, and we re-structured at a time that I think people were surprised that we re-structured and we re-structured at the time that our profitability was going up. That’s proven to be pretty lucky for us now and there are a lot of CEOs in the world that are both having to restructure their company and deal with cost-cutting and deal with the economic crisis all at the same time, and that we’ve been be lucky enough or I know, whatever, for some reason take your pick of luck or intelligence that we looked at. I want to now talk about your question, but in that light, right? Labor is usually not the number 1 cause, certainly not in a manufacture organization that has the billions of dollars in capital equipment that we have. Our labor costs are actually pretty modest in comparison. What one has to do is to keep them balanced. Sometimes you have to do it with benchmarks. Sometimes you do with your own efficiency operations. Sometimes you do it as just a manner that you’re closing on location. If you think about your workforce as your most valuable asset and it far and away outstrips anything, then if you cut it and you cut it arbitrarily, then you will lose the loyalty of everyone that’s left. So, I’d say, if you have to cut it, you cut it and we’ve done that, but you do it in such a way that the employees that remain believe there was enough transparency and honesty and lack of duplicity in those decisions and they understood those decisions, such as they knew why you did it and they believe that the organization that was left was going to be healthier as a result.
Will Swope explains how Intel remains financially agile both by saving money and cutting staff.
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