No-cost change.(performance)

MANY PEOPLE SEEM SURPRISED about the types of cost-cutting measures they are seeing in their organizations these days, but I'm not. In my first eight years of employment, I experienced three annual salary freezes, too many cost reduction planning meetings and some ridiculous annual budget-cutting sessions.

I don't hesitate to tell you that the larger companies I worked for wasted more money than the smaller ones did, and in general, the smaller companies were much more frugal. When we make cost-cutting or other types of strategic decisions, we are taking advantage of what I call "no-cost change." Sure, the meetings themselves probably cost a lot more than they should, and the amount of debate in them might have been excessive, but the cost of making the actual decision is minimal.

Our tendency is to approach cost reduction from the perspective of "stop doing something," when in actuality we should be spending more of our time finding things we should start doing or do differently. We tend to focus on headcount reduction when times are tough because that is the most tangible type of cost savings; however, we must think about how not doing this function anymore will affect our external and internal customers. We also need to consider the value of our human capital.

Many managers don't know their processes and process cost structures well enough to know where the true waste is. In many cases, direct or indirect labor doesn't make up the two largest cost pools in a product or service cost structure. In other cases, high-quality direct labor performance is essential for business health and growth.

Instead of reducing headcount, we should be looking at better ways to utilize our human capital at all levels in the organization. We can improve meeting effectiveness and minimize unnecessary meetings. We can make the choice to change how we develop and evaluate our leaders. We can choose to engage a higher percentage of our people in more meaningful and more frequent ways. We can choose to stop wasting time debating things to death or boring people to no end in monotonous training lectures.

Most importantly, we can choose to make our decisions differently--to base them on a set of criteria that is directly linked to the mission, objectives and measures of our organizations instead of merely to the opinions of one or two people. There is no cost associated with choosing to spend 30 minutes of meeting time using a decision matrix instead of just arguing a possible change back and forth. There is no cost associated with telling someone that you are not going to make a decision until a well-rounded set of facts has been presented.

My perspective may be a bit skewed. I was raised in a thrifty household by thrifty parents. I have never worked for a company that did not have a formal process improvement effort in place or did not aspire to have one. I have worked for organizations that, by today's standards, are overly cost-conscious. I've been brought up to hate waste, and I see it as part of my mission to seek out ways to reduce it. Note that I am equally passionate about considering the long-term, systemic effects of a choice and basing choices on a set of balanced facts at all times; these beliefs and practices are also part of my process excellence DNA.

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What beliefs and practices are part of your organization's DNA? How might you change your work systems to further support or redirect these beliefs in a no-cost fashion?

Kevin McManus is a performance improvement consultant based in Seattle and a 23-year member of IIE. He has written several workbooks on personal and team effectiveness. McManus is a senior examiner for the Malcolm Baldrige National Quality Award. Reach him at kevin@greatsystems.com.

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