Category Archives: Miscellaneous

Making Cost Cuts Stick

A recent article in the McKinsey Quarterly noted that it is often difficult to make cost cuts stick, especially when the economy is improving, and that only 10% of cost reduction programs show sustained results three years later. To try and improve the situation, they offered us five ways CFOs can make cost cuts stick, which, briefly, were:

  • Assign accountability at the right level

    Make sure the people actually spending the money are accountable for how it is spent, and that their compensation is related to how well they adhere to the initiatives.

  • Focus on how to cut, not just how much

    Set policies and procedures that are in tune with desired spending behaviours.

  • Don’t Let P&L accounting data get in the way of cost reduction

    P&L categories don’t give the kind of per-unit insights that help focus cuts in specific categories, like travel expenses, that the company can most afford to cut.

  • Clearly articulate the link between cost management and strategy

    Strategy must lead cost-cutting efforts so managers can deliver a consistent message on how the identified cost reductions will strengthen the company.

  • Treat cost management as an ongoing exercise

    It’s not a one-off exercise driven by the need to manage short-term profit targets, but a long-term initiative designed to build a competency in cost management.

And these are all great ways to control costs and maintain cuts, but I think the real key to making cost cut sticks is to cut what needs to be cut. If you cut what needs to be cut, then the cut is a justifiable and defensible one. This makes it easier to articulate the link, focus on the how, treat cost management as an ongoing exercise, assign accountability, and bypass the P&L as you go straight to the data source.

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Are You Ready For Change?

Take this short 3-question quiz to find out!

1. Is Management Ready for Change?

Management must be ready and willing to demonstrate their commitment to change and keep their resolve through good times and bad. If the rank and file don’t see commitment, they will believe it’s just the fad of the month and ignore the effort as they expect it will be forgotten in a few months anyway when the next fad is announced.

2. Is Talent Ready to Step Up?

Management has to be ready, but the rank and file have to be willing and able to implement the change. If your employees aren’t committed, aren’t trained, and aren’t capable of implementing the change, you’ll be stuck at square one until they are.

3. Are You Ready to Communicate?

Regular and consistent communication is key to success. Efforts will need to be carefully coordinated, and this won’t happen without crystal clear communication. If you’re not ready to communicate, you’ll be stuck at square two indefinitely.

The reality, as clearly pointed out in “driving a turnaround in tumultuous times”, the case study on PolyOne Corporation that we will cover in our upcoming post on coming back from the brink to cash in the bank, if you can’t answer yes to these questions, you won’t have the basic building blocks for change and any change management initiative you undertake will just be a waste of time. Sorry, but that’s just how it is.

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How To Respond to Dubious Unsolicited Business Propositions

We all get them … that sleazy e-mail, call, or, when the con-artist, or, sales representative, is really ambitious, an impromptu office visit offering to slash your software license fees by 90%, reduce your toner cartridge costs by 60%, or securely meet all your cleaning needs for 20% less than the cleaning agency down the street. And we always know, in the back of our minds, that this is just another scam. But how do we respond? Especially when we know we should be polite and professional?

We should follow the lead of Mike Nash and confront the offeror with our suspicion. Because, sometimes, con-artists are more honest than your boss, who’s really only interested in climbing the corporate ladder on your back. Check out this skype transcript where, when a scammer was asked if his important business proposition was really an offer of millions of dollars that I won’t get because you’ll rip me off with advance fee fraud, the scammer, realizing the intended mark isn’t going to bite, got right to the point and said you are right and moved on.

ASG Software Proves the Peter Principle

There’s a reason “leaders” generally only account for a small percentage of the total market (no more than 30%, and usually only 10%). That reason is the Peter Principle which says that in a hierarchy, every employee tends to rise to his level of incompetence. In other words, your average company will continue to promote its “rising stars” through the executive ranks until they implode into black holes and suck the company down with them.

As proof that these “rising stars” are promoted until they implode into black holes at your average company, I offer up a recent press release from ASG Software which describes the results of a commissioned Enterprise Management Associates study of IT and business executives that found that two-thirds of executives say dashboards deliver clear financial advantage.

In other words, it found that two-thirds of respondents were brain-dead corporate zombies who thought that dangerous and dysfunctional dashboards were a money saving tool — even though I’ve told them twice how dangerous and dysfunctional the average dashboard was. The reality is that, even in the best case where the dashboard is properly designed to show you what’s not working, where data is missing, and where you need to investigate performance, it’s not going to save you money. It’s just going to point out where you need to take action to improve performance and save money.

However, you have to determine the action to take and then you have to take the action … and, more than likely, you will have to apply another tool (which will likely cost money) to take that action. Now, if you select the right action, the right tool for the action, and implement the action properly, then you will improve performance and reduce operational costs and, over all, save more than you spend buying the tool … but these savings will not be the result of the dashboard. They will be the result of the appropriate tool and / or your action.

And, furthermore, if you decide to rely solely on the dashboard to judge overall corporate health, it will end in disaster. All a properly designed dashboard can tell you is that there are no problems of documented types. It can’t tell you that there are no problems of undocumented types. For example, it can tell you that the production line is still pumping out finished units within an acceptable range on a weekly basis. It can’t tell you that no one has bothered to properly service the one-of-a-kind robot arm in over a year, even though it’s supposed to be serviced every three months or 30,000 units, and that it’s 30 units from a major lock-up that will cause it to self destruct and shut the production line down for at least a month. And while it can tell you that your new phone is still selling within the forecasted range, it can’t tell you that sales are about to drop 80% next week because the market is going to suddenly prefer your competitor’s new product coming out next week that the model didn’t account for. The false sense of security the dashboards provide will, if you’re not careful, lull your business into an eternal sleep.

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Three Rules of Productivity to get the Most Out of Your Day

Just about all of us are overworked these days. There are two primary reasons for that. One, due to the recession and the jobless recovery*, we’re all being asked to do more than before. Two, we’re constantly having our time wasted by Maury the Management Moron and his imbecillic twins. The latter case can be rectified by following three simple rules of productivity, which will negate most of their efforts to waste your time and suck the soul out of you.

Rule #1: If you are invited to a meeting, and in the first five minutes it is wholly unclear why you are there, leave. Indicate that you’ll be back in 30 seconds if summoned.

If the organizer can’t be bothered to organize a successful meeting, why should you bother to be there?

Rule #2: If you are copied on an email that you do not need to be copied on, ask the email originator to re-send the email without you copied on it. (Or at the very least, to exclude you on all future messages on the topic.)

Enough spam gets through our spam filters and clutters our inbox as it is, which is already full of e-mail we have to deal with. No point adding to the mess.

Rule #3: If you are a manager, and you wake up one morning and realize that the only contribution you are making to the company is accepting statuses from lower level people and providing that same status to upper level people, quit.

Let’s face it. Your job’s not worth doing. Go find one that is — otherwise, all you are doing is contributing to the time crunch and soul suck.

* Which is one of my least favorite bullcrap phrases, because there is no recovery until jobs return.

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