Process revisited: The hidden cost saver

Uncover the smart savings

How often do you take a really critical look at how you do things in your company? Seriously. Processes are strange creatures that exist whether you believe it or not, irrespective of whether you actually set out to design them. This is what many empirical managers fail to understand. Have you ever made a cup of coffee? Is there an underlying process? Of course there is! How else would raw materials and kitchenware end up as an enjoyable and stimulating beverage on your desk? You have inputs, you follow certain steps and get output. Simple as that. So maybe every time you make a cup of coffee you do things a little differently. Get the coffee jar out first, get the mug first, warm the mug, don’t warm the mug and so on. And that’s OK. It’s just a cup of coffee. Why all the fuss? What if you had to prepare a hundred cups of coffee in half an hour? Or two hundred? If you do it a little different every time, you’ll be running for the hills laughing in a manner usually associated with villains in cartoons and vintage thrillers. That’s when you need to design a process and stick to it. So how do you go about it? In ridiculously simple speak, you decide which is the most efficient way to do whatever it is you are trying to do, lay down the process and then stick to it. Religiously. And as they used to say in the olden days (back when people thought things through before hammering out emails to fifty recipients) practice makes perfect. If you do it the same every time, as time progresses, things can only get better. Repetition is the mother of learning. Ad hocking it the mother of cock-ups. And a mean mother in deed…

So, take a look at whatever it is you are doing, whether it’s answering the phone and taking messages, or billing a client, or arranging for a delivery- whatever- and then see if it makes sense to keep on doing it the same way. Usually it doesn’t. There is always room for improvement, to use a cliché, and herein lie opportunities. Here be the smart savings, as the old maps say. Any idiot can fire half the workforce. It takes work, brains and leadership skills to manage change, even if it is efficiency driven.

Process re-engineering can save a lot of time and ultimately money. So where’s the catch? There is no catch, but do be warned: a process left unattended will degenerate. Such is the nature of the creature.  Ever miss a gym session after religiously following a schedule for months? Then next time something turns up and before you know it it’s been three months. If you set up a process also set up the controls.

Put together the nature of processes and the nature of humans and you end up in a process improvement workshop with a lot of people looking flummoxed, at each other or the floor when you ask, “So why do you do it like that?”

 

What is your profit costing you?

Sound cost management makes cents

It is an annoying fact that when providers of services and products decide to increase prices they quote an increase in costs. The truth is that the buyer really does not care about this. What we are willing to pay, depends on… what we are willing to pay. How much it cost the other guy to produce or buy it, frankly does not come into the equation.

Simplistically speaking there are two things that affect your profits, namely revenue and cost. As, nowadays, we are not hearing that many growing revenue stories, especially from the smaller player, it should go without saying that these companies would be looking to cut costs. It doesn’t necessarily. Remember back in the early days of the “crisis” (it’s been going on too long to be called that)? Certain companies “rallied” and issued back-to-profit announcements. Because they fired several thousand consumers. The guys that consume what companies sell. With their salaries. Anyway, even though revenues were plummeting profits showed an increase, not due to multiplication or addition, but because of good old subtraction. It is true that in a healthy company costs should be coming down, but in smart ways, related to phrases and words like efficiency, economies of scale, purchasing power and others we read in books and stuff. Having said this, there are definitely cases in which people, regrettably, must go. But have we cut everything else possible before grabbing the axe?

So, what are you doing about your costs? Do you in fact know what they are or do you limit yourself to a few summary lines your accountant gives you? You need to understand, a) what your costs are and, b) which ones are driving your business. Anything that is not contributing must be rethought. Let me give you a somewhat extreme example. I walked into a ridiculously luxurious office suite. My first question to my associate was, “Bloody hell, Paul! Am I paying for all this?”. Especially in times of frugality and free fall, you need to be taking the oriental approach to value adding and non-value adding and drop the western grey “value enabling” crap. You see, Mr. Client, sitting on a 5K chair really inspires me to improve your customer experience.

By the way, if you don’t start with the blatantly obvious, you will suddenly find yourself doing the panic tango and firing people without having time to plan for the aftermath. And we all know that, especially in business, it take even more than two to tango. Rethink your spending based on value. Every cent saved is flowing to the bottom line.