Profitable Business Owners - Build a Cost Culture By RiverForest
Sit back and reflect on every day stories from organizations on cost-based downsizing. All have reasons; reducing bench strength or poor performers, rationalize businesses, managing costs through the supply chain, expense management or sheer alteration to the Target Operating Model to focus on a strategy led structure. Each of them has a valid story. To me this act of cost optimization, including an unfortunate act of restructuring, is not a sin, it is a process the that corporate sector can and should learn to do. BUT, only after they have exhausted every other cost optimization choice. Not at periodic intervals or when pushed to a corner because of financial results die the next quarter, but as a way of life. Just as how hiring, cash flow management, customer satisfaction & asset acquisition is a vital element of growth, so is an optimization, to stay healthy at all times. Business cycles and its impact on shareholder value are not new to the world of economics. But the science & art of doing so gracefully is a much-needed area of learning. “Culturally, Cost Optimization cannot feel too much like just cutting costs”. In a variety of organizations that embarks on cost optimization, I often seek to probe if the culture is treating it as a one-time action or a way of life activity and whether the process that they wish to follow is transparent, honest and upright. Experience tells you that few organizations seek to conduct these processes with a degree of uprightness it deserves. And the answers, to why so, are complex and ingrained in the socio – cultural aspects of our feudalistic society. Paternalism, Reservations, Minority Claims all with the purported desire to do no harm, play to public & appear to look good, And these hypocritical values, reflect squarely in the way stereotypes work in companies; those who ask for data based decision making as lacking trust, the manager who questions growth projections as a cynic, the one who budgets optimum growth as lacking in vision, HR a villain for asking why we should hire/fire, a CFO is made the target of ridicule for pushing cost initiatives, a CEO who demands, as autocratic, or a sales manager who insists on equivalent travel from women, as being not sensitized to diversity, has lead to this set of superficial cost structures incurred to look good. The degree of cynicism, to cost initiatives, is notorious in the back-room gossip. The problem lies in the word “initiative” as against the need for cost optimization as a “cultural journey”.
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