Staff cuts doing more harm: accountant

An accounting firm has warned Perth businesses that shedding staff to cut costs may be doing more harm than good, with strong leadership the key to surviving the downturn.

The head of Thorton Partners' business development division Jay Roberts said cutting staff in a bid to save money is "one of the biggest mistakes a business owner can make" in the current economic climate.

Mr Roberts points out that in the latest study by the Certified Practicing Accountants of Australia, half of all businesses that cut staff did not reduce their operating costs.

Additionally two-thirds of businesses did not increase profits and three-quarters did not increase productivity.

"Shedding staff may seem like an obvious cost-cutting measure, but managers often don't realise the impact such a practice may have on workplace spirit and staff morale," Mr Roberts said.

"Job insecurity is detrimental to staff motivation and is likely to result in reduced workplace productivity.

"Although management may have made the decision as a way to decrease costs, the opposite is often what actually happens."

Mr Roberts suggests business owners should take more initiative and seek other ways to keep their business afloat.

"In such dire economic times, what will differentiate a business from its competitors is strong leadership," he said.

"Business owners must lead with vision, connect with their employees, implement high performance management practices and have a positive attitude."