How to save money (and avoid implementing expensive, useless solutions)

In a multinational, the CEO found it hard to make different country organizations share resources with each other. If one country had a shortage, the country manager would rather buy additional equipment, or hire new employees, instead of asking others to pitch in. And even if the country manager would ask another, he would get evasive answers and end up with nothing. The CEO felt the downtime for equipment, and indirect hours for employees, could be optimized, if they would just share more with each other.

The CEO decided to buy a fancy planning system. The selection of a system, customizing it, filling it with data, and training people, took two years (instead of the foreseen one year). But then the CEO happily leaned back, looking forward to the increase in profitability due to lower downtime for equipment and personnel.

After half a year, the numbers had not improved. The CEO questioned his country managers. Why were they still not sharing?

Some of them complained: “We have loaned equipment to another country, but we didn’t get it back on the promised date, and had to disappoint one of our own clients. So now we don’t share our precious resources anymore”. Others said: “Well, we want to share, but you see, customs and other legal hurdles are just making it impossible to exchange resources”. A third group lamented: “We love the idea, but still, when we ask for resources, no one is willing to share” (and they had perfectly plausible excuses why they hadn’t been able to loan their own resources to others).

The CEO hired an additional person to oversee the planning system, and force country managers to share. After another six months, figures had slightly improved. But the person left exhausted and frustrated, as she had to fight everyone, every day, for little benefits. Soon, the numbers went back to what they were before.

Several organizations struggle with the same problem. Rationally, the idea of sharing makes sense. But if you face such a problem, you need to investigate the real problem first. In this case, it wasn’t the lack of a system that was holding people back. The real causes were:

  • The lack in willingness to share one’s own valuable resources with others. Fears such as: what if my important client suddenly asks me for this equipment? What if my people don’t want to go to another country? Or when I’d rather keep them to myself?
  • The lack of trust that their colleagues would give them their best. What if I ask for someone else’s people, and I get the bad ones, that endanger my relation with my client? Or when I get equipment that is broken down? Who is going to pay for the additional cost of letting the employees travel, or for repairing broken equipment?
  • The CEO not pushing for what he really wanted: lower costs for the same amount of profit. This was a fairly entrepreneurial organization. Once the country managers understood the CEO wanted a higher usage of the equipment and personnel to increase profit, they worked harder to get extra projects, especially in otherwise quiet periods, to show they really needed their equipment and people themselves. And when pushed for lower costs, they did start to share the expensive, rarely used resources, as they didn’t want to defend those high costs on their balance sheet anyway.

There are numerous similar examples. Systems, or procedures, or models are implemented, meant to solve problems that have to do with behavior of people. Before you implement a solution, make sure you have a good understanding of the real underlying problems. Then come up with solutions that address the behavior you want to change, instead of allowing such evasive behaviors.

4 easy-to-spot tell-tale signs you can save on headquarter costs (2)

In the previous post, the oversized headquarters as one of the biggest organizational wastes was addressed. Oversized corporate departments are a black hole attracting valuable resources, scarce cash-flow and lots of energy.

I’d like to urge you again to consult your local managers and local HR. They can point to the waste in the organization in fine detail. But as I said, these good people are kept away from you by your army. Discuss the four topics in these posts directly with your local management. If they experience (one of) these, you know where to improve your organizational efficiency.

In this post I’ll address the second topic – corporate visits. You know you have considerable waste in your organization when:

local management has to spend more than 10% of their time entertaining corporate visitors, internal auditors and higher level managers.

Some might say, come on, isn’t that part of their job? Corporate people can’t do a good job without having valuable input from local management. Meetings on budgets and results are better done face to face, right? And corporate departments need to show their faces locally, to keep at least a little bit of credit.

True. I’m not advocating a complete stop to corporate visits. But keep them to a minimum. Check what kind of corporate visits local management needs to entertain, and what they have to do for these visits.

Because in the real world, the corporate army designs an interesting set of requirements for visits, leading to a lot of inefficiencies. Examples I have seen:

  • 100+ slides presentations have to be prepared three weeks prior to the visit
  • Many (more than twenty) people will work for hours, if not days, to give input for this presentation
  • Then the presentation goes through an approval cycle, so several people can adjust and sign off (meaning, the corporate army filters the information flowing to the top or to other corporate departments)
  • The personal hobby horses of the visitor need to be addressed, meaning work will be reprioritized to humor this specific visitor
  • Most people want to impress corporate visitors, so whole departments will stop doing their normal work during a visit
  • The organization needs a few days, sometimes weeks, to recover from such a visit. Especially if the corporate visitor blurts out uninformed untrue things about the local organization, or is unfairly critical, or overdemanding. The upset this creates, causes local managers to have to do repair work for weeks. This really happens much more often than people think!

Solution

Check with local management how much time they have to spent on corporate visits, and what they do to prepare (required by the visitor as well as on their own initiative). Reduce the visits as well as the requirements for preparation to a minimum.

For other savings, keep your eyes peeled for the next two posts!