Cost Cutting is Expensive While Effectiveness is Free and Rewarding
Heather let go of the door handle as she walked out of her superior’s office, confused and in disbelief. She took a deep breath as if to renew her strength, and she let sink in what was just asked of her. She was asked to submit her plan to reduce by 20% her department’s budget and still deliver the department’s services and ongoing projects for the year.
She looked at Justin, who preceded her from the meeting. Justin received the same assignment. He walked at a slow pace, before turning half-way toward Heather to start a conversation.
“How in the world can we make this happen without compromising the many ongoing and high priority projects? That’s not realistic. How are you going to do it Heather?”
To which Heather answered. “I don’t know yet but what I know is that my team is very busy day after day with short deadlines, and reducing headcounts will surely causes more delays in service delivery.”
This happened about one year ago. Both Heather and Justin got to work to deliver their assignments.
- Justin submitted his cost-cutting plan for his department on time as requested. The following was a summary of his proposition, which was designed to be fully effective in 3 months’ time. Let go of 3 external consultants and then redistribute their work.
- Five full-time employees would be terminated and their work also redistributed.
- The priority order of several deliveries would be modified.
- Most project-delivery dates to be postponed to later dates.
- Extras, such as free access to the coffee machine for the employees, would be suppressed. The vending machines would stay in the building and employees would pay for their own drinks.
- Quarterly team activity was to be eliminated.
As a result Justin’s plan would reduce costs by 20% in 3 months, and the delivery schedule would be modified.
The plan was accepted and implemented in Justin’s department.
Heather acknowledged that she was operating with only the bare essentials after she had already cut so much during the last five years. So she reached out and asked me if I could help. I then asked Heather more info about the department, their business, and technical operations. We agreed that we needed more time to deliver a sustainable cost reduction plan. Therefore, Heather negotiated and was granted another month before submitting her plan.
During that time, we reviewed the business and technical processes, the tools used, the organization structure, teams, the roles, and the outside collaboration in Heather’s department. We worked with the team leaders to find answers for many questions. Together, we analyzed every aspect of her department to create more efficiency throughout.
Her proposition could be summarized as such:
- Several business processes were to be either shortened, improved or suppressed and five new business processes were created.
- Three technical processes were to be optimized, then automated.
- Two positions were to be eliminated and ten others modified.
- Two services were to make use of one existing tool instead of the two exactly similar ones they were each using, reducing maintenance cost, licensing fees and duplicate work.
- New rules were to be defined for more effectiveness.
- Coaching sessions to be delivered to several teams as they adopted the new work approach.
As a result, the department would increase delivery capacity by 15% while reducing cost by 18% over a 6-month period.
Heather’s proposition was accepted and implemented for her department.
Post Implementation One Year Later:
Justin had a harsh time implementing the plan in his department as it caused more stress, conflicts and dissatisfaction in the organization while decreasing production. Employee morale went down and has remained there, since there is no improvement to look forward to.
The elimination of free coffee and their quarterly get-together created for them an environment of lack, poor recognition, decreased collaboration, and decreased in reliability.
The clients were very disappointed with the delayed deliveries. To make matter worse, they experienced a high turnover rate, causing them to be even further behind in project delivery.
Heather’s department is now running effectively and delivering more, at a faster rate than before, and at a lesser cost. In fact, after the implementation and up to the present day, the cost is now reduced by 22%.
Cost reduction should be a search for improved effectiveness first. Approaching cost cutting as a search-and-destroy mission to cut all extras or reducing only the immediately apparent costs just decreases productivity and therefore ends up costing the company more per production.
How many processes, tools, and roles are outdated, duplicated, irrelevant, and/or repetitive in our units? How about the ones that no one know ‘why’ they exist? Or the multiple tools that our teams use when just a few of these tools can be used by more or all of the teams? How many manual processes can be automated?
In summary, cost reduction is costly, but effectiveness is free as it pays for itself with increased productivity. The good news is that each one of us at our own levels can create some more effectiveness.
Do you need help for creating more effectiveness? Contact me and let’s do it!