The cornerstone for any organization to saving money can be summed up in two words: MANAGEMENT COMMITMENT. My experience in cost management shows that if management is committed to saving money, IT WILL! The question is, why doesn’t executive management take this first step? Isn’t saving money an integral part of their job? Don’t they understand that no organization in the 21st century can survive with disproportionately higher costs than their competitors? Let’s now look at the reality of the six reasons why organizations aren’t committed to saving money:
1. Management by DRIFT
Too many organizations are caught up in the activity trap. That is, a lot of activity but little or no results. Their short-term planning is five minutes and their long-term planning is 15 minutes. They jump on the bandwagon of the next big management fad – Six Sigma, 100-day Plan, 360 Degree Evaluations, The Agenda – without having a master plan that is proven to save money.
2. Fiddling While Rome Burns
On the other hand, there are organizations that are near bankruptcy and don’t know they are bankrupt. They are losing money, can’t pay their bills, don’t have money to replace their equipment or to give their employees raises, but they are doing little to nothing to stem the tide of red ink. They are frozen in place, wearing rose-colored glasses, and fiddling while Rome burns.
3. Why Rock the Boat
There is a philosophy among some executives that if you keep your head down, you can keep out of harm’s way. They don’t make any savings recommendations because they might take some heat or risk taking some criticism if the idea doesn’t work out, so they just keep their heads down and don’t rock the boat.
4. Overconfident
It’s not uncommon to hear an executive say, “I’ve got the best people, the lowest costs, and excellent cash flow. Why do I need to save money?” In reality, he or she won’t have the best people, the lowest costs, and excellent cash flow for long with an overconfident attitude. All organizations have business cycles (good and bad). Chrysler, AT&T, Microsoft, Hewlett-Packard, and most of the dot-coms are good examples of this overconfident attitude. Overconfident executives should learn from these lessons, too.
5. Not Invented Here Syndrome
This should be added to the list of the seven deadly sins as the most deadly sin a business can make regarding saving money or, for that matter, improving its organization as a whole. The term “not invented here” simply means that an organization accepts little or no ideas from outsiders (consultants, vendors, or competitors). They know best what works at their organization. “Only insiders have the best ideas to save money,” is their mantra, and they let you know it.
6. Focused on Other Priorities
I’ve heard just about every excuse as to why organizations don’t have the time to save money (new building program, joining a network, the board wouldn’t like it, labor union campaign in progress, new computer installation). While many of these programs, projects, and tasks are important, if an organization doesn’t continuously control and conserve its money, manpower, and materials, it won’t have the money to do all the other things it wants or needs to do.
Now that I have raised your consciousness on what’s holding back your executive management from committing to savings at your organization, what can you do about it? The first step is to internalize the six reasons why your executive management or your direct report might not want to commit to saving money, then develop counter arguments that compliment this reasoning. For example, if your management is adrift (lost in an activity trap), try to show them how your recommended cost saving idea will be a good fit with their current initiatives. Or, if they tell you that their plate is too full for a new project, try to convince them that there is room for just one more project, especially since the savings from your project will pay for the building program, union campaign, or computer installation that he or she is worrying about paying for.
The solution to this management commitment challenge isn’t to fight your management’s reason(s) for non-commitment, but to use the six reasons that are holding back savings to formulate and integrate your cost saving ideas into their thinking like a good fitting glove. By following this formula, you will gain the management support you need to launch not just one, but many cost management initiatives with strong management commitment and support.