The term peanut butter approach reflects the idea that you will apply the same tactics to all aspects of a business. For instance, your business might need to cut 10% of its workforce. Under the peanut butter approach concept, you’d reduce your workforce evenly among different departments. Managers would be just as likely to be laid off as regular employees, and any department, productive or not, would lose 10% of its workers.
There are some inherent problems in the peanut butter approach if you apply the same tactics to all parts of a business. The company that simply reduces 10% of its workforce without considering that certain departments may need more workers because of greater productivity generally makes a mistake.
Another way that the peanut butter approach is mentioned in business is when companies give raises. Instead of determining raises on a merit-based system, some companies give the same raise percentage to all employees. This can have unfortunate consequences because it rewards employees that may not merit raises and at the same time may not encourage employees, who have worked very hard, to stay with a company.
It frequently is used by managers who cannot make decisions so they equally mete out criticism, punishment and/or praise to all whether it is merited or not. It is often a sign of weakness in a manager.
When looking at the budget cuts, we will apply a peanut butter approach and cut all housekeeper's hours evenly so there is no perceived favoritism. Even if we need longer hours on those shifts to clean the facilities, or those employees are better performers, it doesn't matter - we have to cut everyone exactly the same to avoid controversy.