Discover Hidden Costs in Your Business

 Are you focusing on the wrong things?

By Eric A. Denniston, Managing Director

Many companies respond to slow growth cycles with a knee-jerk reaction of cutting jobs as well as budgets. While this may be necessary, too often what has happened is that executive management first looks at the highest paid employees and offers them an early retirement package. They also look at advertising, training, and marketing budgets to see where else to trim expenses. Then they move to the next level of salaried managers and eliminate them.

As a result, these firms face a lack of bench strength in terms of middle managers who know the business and can quickly help the company get back on its feet as the economy turns around. There may be a wide gap between the staff and the executive team that are left, creating a serious leadership void when retaining talent for the next upturn could be critical. Consequently, morale may plummet, with those who are left waiting for the other shoe to drop and wondering how safe their jobs are. This prevents them from focusing on their work which is crucial to helping the company progress.

What can be done to turn this around? You can focus on employee culture and look for ways to empower your staff to take an ownership view of their jobs. It can’t be simply mandated, people need to understand how their work contributes to the organization’s success. There are creative ways to reward your people for helping to find even more ways to eliminate bureaucratic waste – without cutting jobs or paying out bonuses in cash.

Cut Unnecessary Processes

Look at the processes in your business. Are they all necessary? Are you doing things because they’ve always been done that way? Or are there opportunities to change or eliminate some processes altogether because they’ve become outdated or irrelevant? It’s time to take a hard look at where you might uncover some hidden costs and discover new-found savings.

For example, is it really necessary for every person, manager or department to have their own printer? What would be the cost savings if you networked a few printers instead? In addition to the cost savings in having fewer printers to support, the exercise each manager would get by walking from his/her office to the printer and back would be beneficial giving them a short respite from their work and an opportunity to talk to their staffs.

If you use color printers in your organization, did you know there’s a simple, inexpensive, solution for most printers that will force the printer to print in black and white instead of color and to print two-sided instead of single-sided? How much could you save in paper and ink on an annual basis by installing that device on all your color printers?

Those are just two of the creative ideas participants have gotten from attending a two-day workshop we led. Some participants found as much as $2.5 million in cost savings annually!

Impressive results!

While it may be possible to organize this process internally, a key benefit to bringing in an outside, independent facilitator who can coach and guide the process, is the person guiding the process only has a stake in positive outcomes, not political or selfish gains. The results are most impressive when a cross-section of your staff (between 25 and 30 at a time), from senior executives to the lowest level person, participate in a two-day, offsite retreat.

During the two days, each person works individually and in cross functional teams of two or three to look critically at the work they do every day and write down non-essential tasks they perform that could be done differently or could be eliminated or transferred to another department where it makes more sense.

The consultants establish a safe environment that encourages creative thinking and rewards cost savings suggestions. Executive management is required to immediately approve, decline or request more information on each suggestion participants make. Every client who has done this has averaged $40,000 per person in immediate cost savings, without eliminating jobs or adding any new investments in equipment, software, etc.

Total annual cost savings are averaging more than $1 million per company and sometimes much more. Plus, morale has improved. People feel valued. Their contributions are being heard and rewarded, and the long term benefit is a shift in culture from one of entitlement or fear to one of ownership and accountability.

Now may be the right time to try something radically different. What have you got to lose?