Business Cost Reduction: What to Do?

Monday, March 23, 2009 by Tripp Babbitt

Folks are hitting my blog from everywhere on earth.  What are they most interested in . . . "How do I reduce costs?" or business cost reduction. The easy way is to reduce headcount, which to me is the worse thing to do.  You wind up with dictates like let’s cut 6, 60, 600, 6000 people from our company.  The bean counters love this approach just cut so many from each department.  These folks are command and control thinkers, they understand nothing about the "work" just the numbers.  I understand those that are forced into this to survive and have NO other alternative.  But what about those that didn’t eliminate bonuses or take executive pay cuts . . . FIRST.  The response is typically we have to keep the good people, funny how it usually isn’t the executive ranks that are trimmed.  So, now we have too many chiefs and not enough indians . . . any one left to do the work?

A systems thinking company does everything they can to not lose those on the front-line.  Executive pay and bonuses are cut FIRST.  Then "across the board" pay cuts before job elimination takes place.  These organizations understand when things get better they will need their collective system to service customers.  

Need more?  Business improvement and cost reductions can be achieved by eliminating failure demand (rework, "chase" calls, etc.) at the points of transaction of service organizations.  Call centers run from 25 to 75% failure demand which is unprecedented opportunity to achieve these reductions.  This may mean that mangers and executives need to step outside their office amongst the front-line to learn about the work they have been managing from balance sheets and income statements for the last two decades.  Scary stuff to actually go where real work is done that matters to your customers.  You will find plenty of waste from that last policy, rule, script, strategic plan, mandate, target, project, balanced scorecard, performance appraisal, etc. from the last executive dictate.

Get started today with systems thinking.  A free download is available to "Understand Your Organization as a System" with information and exercises. Twitter me at "failuredemand" or "tribabbitt", but get started.


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