In my article on How to Know What Areas Need Improvement , the first guide that I give is to focus on costs.
The article stresses that whatever your organization is, whether you are operating for profit or with a budget, like a government agency, the good result of initiating with a cost reduction is great.
This doesn’t mean that we eliminate necessary services, such as income-generating activity, in order to reduce costs. It means producing more products and services for every amount that the organization spends.
You must analyze and act assertively on how the present operating expenses can produce more products and services or how the same volume or products and services can be produced at lesser costs.
A manager’s basic function is to get the work done, but certainly not at any cost. Finding ways to improve your operations with better, less wasteful methods is as important a contribution to your company as meeting production quotas and schedules. Here’s how to balance the two areas of responsibility:
* Use Time Well. Wasted time is one of the costliest elements in any operation. A manager can cut this waste by engaging the right equipment, the right materials and the right people at the right time. Time is the essential element. The lack of any factor at the right time holds up the job and increases costs. Learn these facts about each operation: how long it takes, how many people are needed, how the work flows from station to station, and the capacity of each station.
* Coordinate Correctly. After determining just what has to be done, where, and by whom, each step must be coordinated. Proper coordination can eliminate waiting for assignments or supplies, cut down chasing time for information or materials, and assure optimum use of workers and equipment.
* Insure Proper Work Flow. Sometimes poor work flow just sort of grows from a lack of any real planning. Improper work flow results in uneven workloads and unproductive waiting time. Don’t let time-wasting bad habits develop into accepted procedures.
* Schedule Carefully. Any kind of bottleneck adds to costs, but you can avoid some of them with proper scheduling. Even the occasional rush job should not throw off your schedule if you have padded in a little extra time for the inevitable emergencies. If you don’t need the time, you don’t have to use it. But if you do need it, using it won’t create excessive costs.
* Use Manpower Efficiently. Failing to use available manpower to the fullest potential is always the costliest item of doing business. Target these areas of waste:
– Using more workers on a job than are actually needed.
– Not having enough workers on a job, resulting in unnecessary overtime.
– Using highly paid, skilled workers on jobs that lower paid workers can do.
– Failure to use skilled workers in their specialties for reasons of day-to-day expediency.
– Failure to give adequate on-the-job training.
– Not policing the overtime. Is it really necessary or would realistic scheduling help reduce it?
As good executive, you shall act as role model in terms of cost reduction. According to John Maxwell, When they need to cut cost, many executives will sacrifice employees ahead of their own corporate perks. They see their OWN picture instead of the big picture. I believe that a leader should not ask others to make sacrifices until he’s made some himself. A good employee is simply too valuable to let go without exhausting other options.
If you have any other cost reduction ideas to include in this list, I shall be very glad to hear from you.