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Fixes That Fail

2 January, 2020 by James Lawther 2 Comments

Cost cutting

Definition : An effective short term financial fix that has long-term consequences. These ultimately require more of the same short term fix.

Examples:

Profit numbers were low so managers deferred essential maintenance.  They saved money in the short term, but the machines failed.  This led to poor customer service, reduced sales and — in turn — lower profits. So they had to cut more costs…

Profit numbers were low so managers instigated a recruitment freeze.  They saved money in the short term but nobody was available to handle customer queries.  This led to poor customer service, reduced sales and — in turn — lower profits. So they had to cut more costs…

Profit numbers were low so managers put in place a travel ban.  They saved money in the short term, but communication, coordination and teamwork failed. So new product launches were delayed.  This led to reduced sales and — in turn — lower profits. So they had to cut more costs…

Profit numbers were low so managers banned the use of colour printing.  They saved money in the short term. But nobody understood what the grey scale charts and presentations meant and they were ignored.  This led to reduced sales and — in turn — lower profits. So they had to cut more costs…

Other fertile areas to create cost cutting spirals include:

  • training
  • purchasing
  • finance
  • staff canteens
  • service desks
  • bug fix programmes
  • pay rises

Unique characteristics

With a little care and attention managers can persuade most cycles to spin up as well as spiral down.

Cost cutting spirals are unique.  They only head south.

Alternatives

The more you cut costs the more cost run away from you.  Try building capability instead.

Post Script

Reference the colour printing…

I kid you not, I have experienced this one, I had to sweet talk the Ops Director’s P.A. for access to the colour printer. Mind you, they still ignored my presentations.

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Image by Joe Higgins

Filed Under: Blog, Process Improvement Tagged With: capability, cost saving, systems thinking

About the Author

James Lawther
James Lawther

James Lawther is a middle-aged, middle manager.

To reach this highly elevated position he has worked in numerous industries, from supermarket retailing to tax collecting.  He has had several operational roles, including running the night shift in a frozen pea packing factory and carrying out operational research for a credit card company.

As you can see from his C.V. he has either a wealth of experience or is incapable of holding down a job.  If the latter is true this post isn’t worth a minute of your attention.

Unfortunately, the only way to find out is to read it and decide for yourself.

www.squawkpoint.com/

Comments

  1. Phil Mendelowitz says

    5 January, 2020 at 4:02 am

    Been there too. Managed the corporate services department during “cost-cutting” and could only allow requested color jobs with the V.P.s signature. No exceptions. All of us in management took 5% pay cuts, along with other moves described above and about 8 months later we saw the fruits of our sacrifices when they closed their doors for good.

    Reply
    • James Lawther says

      6 January, 2020 at 8:36 pm

      Tragic Phil, I bet you were delighted.

      Reply

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