Saving Money, Destroying Value
In tough economic conditions, most organisations cut costs and trim unnecessary expenses. From observing my clients, this needs a great deal of care and understanding if it’s not to “backfire”.
Organisations risk causing the very event they wish to avoid - the destruction of their business - by not understanding what creates the value of their business. “Value” is what attracts customers, and means different things to different customers. For some, it’s the lowest price, for others it’s service, whilst some may come because of another “loss leading” product/service which induces them to use your profitable products or services.
The first costs to be cut are usually:
- Advertising
- Equipment replacement
- Travel
- Training
Then come the “unprofitable” or “loss-making” products/services. As I mentioned, these may be what actually bring the customers in. Cutting those may result in having to make even more drastic cuts elsewhere to maintain profitability in the face of declining revenues (brought about by cutting the very things that attracted customers).
Equally, when you cut headcount, are you cutting the person/people with the vital customer/product/process knowledge that attract your customers?
One global bank has been scaling back its business and selling off “unprofitable” operations to reduce costs (read “increase shareholder value”). They’ve sold off retail banking businesses, but kept the “corporate” business in certain countries. Companies need to pay salaries into bank accounts and value having employee accounts at the same bank. Given the scale of competition in most countries, it may not be the best idea for the bank to close its retail business (unless they’ve agreed to maintain employee accounts). That bank’s share price has steadily declined over the past two years, despite their cost-cutting. It may not be related to the sale of those businesses, but the strategy isn't working…
The key is knowing what creates value for your organisation or business. The way to find this out is to talk to your front-line staff and customers. Whatever happens, don’t make decisions without this crucial information. Don’t assume that you really know what the customer wants.
We have a tendency to look at the list of costs, identify the “big ones” or the “unnecessary ones” (in our eyes) and start there. This is a perfectly valid approach, but must follow on from a careful analysis resulting from “knowing your customer”. Otherwise, you risk creating the very event that you wish to avoid.
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.Labels: Crisis Management, Customer Care, Financial, Strategy
Keeping Your Talent
By this, I don't mean your own talent, but that of others. I’ve known businessmen who suddenly found themselves faced by the departure of a key individual in their team without knowing what happened.
Sadly, this is often the business’ own fault. Talent, like business, goes where it is welcome and stays where it is well treated. Salary and benefits are an attraction, but if the “player” feels under-used, under-appreciated or unacknowledged, they will look for other opportunities (even ones that may not pay so much).
Talented people need:
To be able to use their skills:
That’s the reason that they trained and studied so hard. These are the skills that interest them, that they enjoy using and that they apply well when given the opportunity. For them, that task is almost “effortless” because they can literally do it in their sleep.
To be appreciated:
Who doesn't enjoy a compliment (however small)? Not only does it make people feel good about themselves, but also that they are appreciated by the business.
To be acknowledged:
Similar to being appreciated, this leans more towards a sense of feeling that those skills are recognised as relevant and important to the business. All those years of study and/or training were worth it because they now make life easy for others.
To improve:
Anyone worth their salt wants to improve themselves and thereby the organisation that they serve. Very few people get up in the morning wondering, “How can I make things worse today?” Try giving them projects or work that may be slightly out of their “comfort zone” and seeing how they do. Send them on training courses if you can afford it, or on attachments to other departments or businesses. If you buy or sell from third parties, ask if they could work with them for a period.
To succeed:
They don't want to feel that you’re the only one benefiting from their efforts. They want to reach their own goals as well. These could be promotion, a bonus, recognition/acknowledgement, getting that new product or service into the market or achieving that certification. Understanding what they want helps you see where they can make the most contribution.
Of course, one can't go around patting people on the back or send them off on training every day, but failing to do this from time to time is tantamount to saying to your talent that they are irrelevant, unappreciated and have little contribution to make. I have engineered my way out of jobs simply because I saw the hard work I had put in going to waste and no real opportunities to grow.
Those who think that motivating staff (beyond paying a salary) is not their job as a leader are deluding themselves. They will see mediocre performance, low morale and high turnover as the result.
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. After more than 20 years in the global financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610
.
Labels: Leadership, Productivity, Strategy
