If ever there was a “right time” for true transformational — and, yes, disruptive — change, it’s now. After all, you’ve probably already stripped costs to the core. You’ve probably already laid off people, including many valued and experienced workers.
You’ve already disrupted the company, so why not use this as an opportunity to take significant steps toward the long-term, sustainable changes of organization and culture that will position your company to emerge from this recession stronger than ever, and ahead of your competition.
Make no mistake about it: If you are serious about the kinds of changes needed to put your company ahead of the competition, there must be disruption. Anything other than cosmetic changes means tackling the culture and systems that have grown entrenched over time. Your systems may be inefficient, but they certainly are embedded.
In this economy, the need for permanent efficiencies is clear. But even though it’s common knowledge that it makes sense to act now, the news will be a further disruption. So it’s necessary to explain your goals clearly, and in terms that your employees (and especially management that has to carry out your plan) can understand and embrace.
It’s tempting to avoid disrupting your business by persuading yourself that it’s just not worth it. That’s because, in most cases, inefficiencies are a series of relatively small problems. But together, they represent a startling loss of productivity, which in turn means millions — often hundreds of millions — in unnecessary costs.[pullquote]
We deal primarily with large manufacturers. For these companies, efficiency can be measured by labor productivity, down time, overtime, energy costs/energy waste, scrap and efficiency of machines. There’s literally hundreds of thousands of dollars — or millions in large companies — just lying around for easy pickup by addressing inefficiencies in each of these areas.
So why don’t companies tackle these issues? Some say the individual pieces are too small to bother with. Others justify inaction on grounds they don’t want to frighten or shake up the workforce.
The real reason is that it requires a cultural change to address all of these seemingly small elements. Part of that change is to accept that functions critical to your long-term success may not be part of your core competency. Being “non-core” doesn’t mean the function can be ignored. But that’s what ultimately happens.
Again, consider my company’s business as an outsourced provider of maintenance that helps factories run better. I ask potential clients three questions:
- Do you put your best and brightest into maintenance?
- Is maintenance a fast-track to management at your company?
- When was the last time somebody from maintenance generated an idea that resulted in huge savings/profits/benefits for your company?
Or put the issue in this context: Do your customers choose your product over the competition because of how you do maintenance? Do they even know how you do maintenance? Do they care?
Of course, the answers are “No.” To me, that is the definition of a non-core function.
If that function is critical to your business, you have three choices: make it a core competency, outsource to somebody for which it is a core competency, or live with the inefficiencies and resulting costs.
In this economy, the last option seems foolish.
Simply put, you must explain your focus as building long-term efficiencies, not just cost-cutting. That means you’re looking for ways to do things differently, focusing on your processes, rather than the costs. Certainly, if you find ways to do the job better, one result will be to cut costs. But your focus should be: How can we do this job better? How can we do a better job of delivering quality products or services to our customers?
So start with the customer, not with the cost of any specific step. If you look at your business from the customer’s point of view, you’ll quickly identify what you need to do.
For example, my company handles a variety of maintenance functions for manufacturers. We assigned account managers to deal directly with clients. These managers reported to our sales group. In addition, we had area managers who reported to operations, and also dealt with the same customers.
It turns out our customers were confused by having to deal with two people. A more important lesson for us was that customers inevitably established a stronger relationship with one of our people than the other. It was a simple matter of personality preference. But the result was that the other manager was not effective.
So we eliminated one of those positions and now have only one representative assigned to a customer. It did end up cutting costs, because some jobs were eliminated. But we approached the issue by seeking customer satisfaction, not just cutting costs.
When done right, these types of actions will ultimately help you serve customers better and cut costs significantly. Will reexamining these issues in your company mean disruption? Of course. But if not now, when?