by Doug Hudgeon
The Cost Management Tip
Building a cost conscious culture in your organisation is the most important tip I’ll deliver in this series of posts. If you can create a cost conscious culture in your organisation then you’re pretty much done and dusted. Nothing else you do will cut costs more.
Recently, I spent the better part of a year looking at cost savings opportunities in 120 companies across four continents. I found that the most efficient companies had one thing in common: Their staff – from the CEO down to the receptionist – were incredibly cost conscious. Companies with staff who continuously questioned whether they were achieving their goals in the least expensive way were consistently more efficient than their more profligate competitors; regardless of the systems and processes they had in place.
The cost-conscious companies achieved and maintained their low-cost base by reducing demand and ensuring they identified the simplest solution. If they didn’t need to buy a particular product or service, they wouldn’t buy it. If they did need to buy something, they would buy the lowest cost product or service that met their minimum requirements. The outstanding question, of course, is how do I create a cost conscious culture in my organisation?
In the remaining tips in this series, I will give my views on achieving this and improving the operating efficiency of your organisation. Related web sources In the tips, I will link to an article that supports the tip.
The below article is an exception in that it provides a cautionary tale for those companies embarking on a cost reduction journey. The article compares a company with a culture based on customer service to a company with a culture based on cost savings had this warning for both companies: “there are countless efficiency ideas inside his company [Customer service oriented company] which never see the light of day because the happiness culture shuts them down.
Similarly, there are customer satisfaction breakthroughs which never surface at the low-cost manufacturer I mentioned earlier where everyone is implicitly taught to only support cost-saving ideas” Related books The End of Growth: Adapting to our new economic reality I haven’t bought into the thesis of this book.
Whilst I believe that we are in a sideways market and that, for the next few years, most companies will only improve their operating efficiency through cost reduction; I don’t believe that the global economy has peaked. Over the past 200 years, too many people smarter than me have predicted this and been proven wrong. Nevertheless, the book is well written and well researched and worth reading. “Economists insist that recovery is at hand, yet unemployment remains high, real estate values continue to sink, and governments stagger under record deficits. The End of Growth proposes a startling diagnosis: humanity has reached a fundamental turning point in its economic history.
The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits. Richard Heinberg’s latest landmark work goes to the heart of the ongoing financial crisis, explaining how and why it occurred, and what we must do to avert the worst potential outcomes. Written in an engaging, highly readable style, it shows why growth is being blocked by three factors:
- Resource depletion
- Environmental impacts
- Crushing levels of debt
These converging limits will force us to re-evaluate cherished economic theories and to reinvent money and commerce. The End of Growth describes what policy makers, communities, and families can do to build a new economy that operates within Earth’s budget of energy and resources. We can thrive during the transition if we set goals that promote human and environmental well-being, rather than continuing to pursue the now-unattainable prize of ever-expanding GDP.”
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.