Managing in a Downturn Economy

With a widespread economic downturn, such as the one we are currently going through, managers, up and down the command chain should be actively prioritizing and seeking ways to reduce cost while eeking out greater levels of production through efficiency.

Most of us have already done the “easy” stuff (reduce/eliminate travel, benefits, staffing, etc) and while those have contributed to the bottom line circumstances call for another look at sustained and dramatic cost reduction going forward.

In my opinion, cuts going forward will need to balance current capability against proposed capability under a growth scenario, without significant increases in resource costs. Simply put do more with the same or less.
One-way for managers (all managers and I would go so far as to say front-line supervisors) to do this is to look at the business unit from a 3-tiered perspective. Those tiers are: Minimize – Optimize – Redesign.

Minimize – First, managers, if they have not already done so, need to look for immediate cost reduction opportunities. One of the most common euphemisms in my profession is “… kill a tree.” We need to continually ask whether an action or a resource, is a “want” or a “need”. If it is a “want” how does the business unit benefit by having it and at what cost and if it is a need, are there alternative ways to satisfy that need? For example, my profession spends an inordinate amount of money on paper costs. We have established, as an ordinary course of business, to have a complete duplicate file of data that is often in electronic form. This could take the shape of forms, files, manuals, policies, procedures and the like. All of which exist, for the most part, electronically. Even if managers have already done this, it deserves another look, perhaps from a fresher perspective in the form of a department or division-wide rewards program.

Such a program would carry with it a minimal cost but has the potential to reap cost reductions far in excess of the cost or reward offered.

As managers, we need to seek out the “hidden” costs that have seeped into our business or areas of responsibility. As an Operations Manager, in a prior life, I had P & L responsibility of a wholesale unit in the Northeast region. One of the things I did was to look for expenditures that have become operating costs that provided with little or no value. I questioned everything (I can say, that while I was respected, I was considered a friend of Accounting) that I could not justifiable identify or support in my unit. As a result, costs were appropriately allocated to their correct cost centers, others were reduced and some of them were eliminated. Managers need to know what it costs to operate their unit and there should be an incentive to seek out efficiencies.

Optimize – One of the best ways to increase operational efficiency is to increase the depth or improve the use of our existing software systems and hardware assets. By doing this we will inevitably begin to identify non-essential systems, assets, processes thereby decreasing our average unit costs, while at the same time begin to make permanent changes in the processes employed. One of the improvements that I initiated was a centralized knowledge management repository that replaced a multitude of physical manuals, P & P’s, QuikPiks and the like. I called it “The Wizard”.

By creating a single repository, increasing search capabilities and creating dynamic content capabilities through enhanced policies, procedures, QuikPiks and P & P alerts. Moreover, by linking vendor sites and lotus notes, I was able to offer our associates the ability to find more content, more quickly as well as provide an avenue to “Ask the Expert” should the content not provide a clear answer to their query. This enabled our associates to spend more time on client-facing activities.

One of the things we should continually look at is the consolidation of our data processing environments to gain, what could be, substantial cost reductions with continual payback in the form of time spent processing data, the quality of said data, the reduction of duplicity and error rates. We need to look at any series of systems that provide essentially the same function and decide to enhance one over the elimination of the others. If there are proprietary accesses that need to be established then sufficient security tools should be implemented.

Redesign – At this point, managers should be able to shift the focus to a more efficient and effective operation by putting into place or embedding structural changes brought on by minimizing and optimizing steps noted above. This will result in several positive outputs: improvements in labor costs, better operating models, uniform processes and procedures (supported by policy), transformational technologies and sourcing strategies.

An example of a transformational technology at work was first identifying the one common system thread that weaved its way through a majority of functions at my company. From there we redesign the screen flow to match the common functions and the way we commonly review the data. Since I work in a company that exists in a regulated environment, I added “pop-ups” or informational user guideposts that provided everything from common reminders to warnings. This allowed the user to work more efficiently in that the guidepost were designed to increase efficiency by reducing the time it took to source regulatory or policy information.

I guess the bottom line here is that cost cutting and process improvement are not mutually exclusive. There is pork in every budget and every P & L and with more people looking at it from their perspectives the more opportunity we have to gain positives through enhancements.