31 July Making Cost Control Permanent (...cutting...prevention.)

[Paul Terlemezian]

Drucker asserts that shifting the employee's mindset from cost cutting to cost prevention so that it will be embraced as a means of better and more secure jobs.

 

His suggestion is that activities be put on trial every two or three years.

 

Here's a suggested format:

 

1. Put the activity on trial.
2. Ask for proof that the activity is justified (i.e. producing measurabe business value)
3. If not then what is the plan to eliminate the expense, reduce the expense or fix the activity
4. Fixing needs to be justified with a plan for which someone is accountable.
5. If the activity is producing measurable business value then ask:
   1. Is there a way to maintain the value and reduce costs?
   2. If more were invested would it produce more value?
   3. What alternatives are there to the activity that would be at least as productive

In each instance there needs to be accountability for results. The cost of the trial needs to be considered in the cost control process.

 

Are there examples of things that should be done without being put on trial?

[Paul Terlemezian]

This process may be what differentiates a "hobby" from a business. "Enjoyment" is a very important factor in determining which hobbies we invest in. "Enjoyment" is also very important to employees. Is enjoyment important to the business? It feels like it should be. How do we justify it? Is it possible for there to be too much "enjoyment" from a business perspective? Have you every had a hobby which you enjoyed too much? Has a hobby interfered with work or other aspects of your personal life? It seems reasonable that while enjoyment is important to a business - there is likely to be a "limit" - determining the limit is not likely to be something that is enjoyable!