What Can a Lilo Teach You About Cost Control?

We all want to take cost out of our organisations

The way we do it is by jumping up and down on the issue that is causing us most pain at the time. We jump on spending to reduce expenditure.  We jump on the finance budget, jump on the IT budget, jump on the postage budget, jump, jump, jump.

An unlikely analogy

Most organisations are like lilos.  They are full of air / cost.

If you jump up and down on your lilo all that really happens is that the air pops up somewhere else.  The same is true if you jump on cost:

  • Jumping on the postage budget will cause chase phone calls
  • Jumping on the IT budget results in system errors and frustrated staff
  • Jumping on finance costs may cause them to pop up in poor customer service

Worse still, you can never be totally sure where the cost will materialise.  Jumping on costs is a little pointless.

To take air out of a lilo…

You open the valve.  In an operation you open the valve by improving operational capability, you fix things that don’t work.

  • You make sure that all your letters are printed and sent every day
  • You stop system exceptions so orders aren’t left in limbo
  • You balance customer accounts so customers aren’t sent the wrong bill

You improve operational capability.

Then the analogy fails

If you take all the air out of your lilo, you sink.  Still, I hope you get the idea before you get wet.

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Cost Control and Lilos

Image by Speculum Mundi

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Comments

  1. Absolutely agree.

    It is amazing what you can achieve if you focus on improving the capability of your organisation.

    Using tools like 6 sigma and BPI (business process improvement) can have rapid results and improve profitability enormously

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