“There Isn’t Much More We Can Do To Reduce Costs For Our Business” (Myth 1)
Often, when thinking about reducing costs, it is easy to focus on “cost cutting.” This may be achieved in a number of ways, from reducing the number of employees to buying lesser or cheaper materials.
I fully understand that you are running a business and need to make a profit, but I have seen first-hand the results of thinking that saving money can only be achieved by cutting costs. Unfortunately, the truth is that it can cause all kinds of dangers and difficulties for your organisation, from inadequate safety of the workplace to poor-quality products or services for your customers to low morale of your employees.
When you are running a business, the most important thing to hold in mind is that reducing costs should never be about compromising safety, quality, customer delivery or people’s morale. The good news is that it’s possible to maintain the highest standards of safety, quality, customer delivery, and culture & morale, and still make savings.
The Flourishing Tree And The Leaky Pipe
Think of your business as a tree. You want it to flourish and be fruitful, and you need to water it regularly in order to achieve this. If you are hoping to reduce the amount of water you are using to nurture your tree, then you need to think carefully about how to achieve this.
Chopping off the branches so that you have a smaller tree or watering it less frequently may save water, but those approaches won’t do the tree any good. It is far better to ensure you have an efficient and effective way of supplying your tree with the water it needs with as little waste as possible, so that you don’t sacrifice its health.
Let’s say that you’ve developed a system for supplying your tree with water, delivered directly to the roots via an underground irrigation pipe. It works well, and the tree is getting the right amount of water to thrive, directly to where it needs it. However, are you aware that the pipe could have unseen leaks along its length, and you are using more water than you need to?
The leaks don’t have to be significant in order to add up to big losses over time, and if the pipe is riddled with even the smallest of holes, the amount of water being wasted is going to cost you a great deal; and because you don’t see the leaks, these wastes are not easily visible or obvious.
The “flourishing tree and the leaky pipe” are the reasons why it’s so important that, rather than thinking of “cost cutting,” we think about “cost improvement.” This means that instead of looking at ways in which to cut costs, we focus on spending money more wisely by reducing unnecessary waste.
There are many different kinds of waste that can be generated by a business, which can be divided into: tangible waste, which largely relates to materials and time; and intangible waste, which includes damage to reputation, morale, culture and missed opportunities. Both tangible and intangible waste ultimately cost you money.