Who are the Winners and Losers in this Cost Driven Business Climate?

Who are the Winners and Losers in this Cost Driven Business Climate?

There are winners and losers in today’s management. Not those who already blew it with fraud, greed and mismanagement but those who are not capable of convincing their management of making a change which leads to a long term cost / time saving.

Perhaps a bold statement but it is true. After almost one year of being in daily contact with decision makers it is clear that there are winners and losers in this environment.

Excepted are those leaders who cut the big peaces out of the cake. Everyone can fire 10,000 people. Short term cost cutters are no winners. Maybe they are not losers either because they get paid for it very well.

Also excepted are the unfortunates who simply had no chance and were part of the inevitable job cut. But this is about those who still are out there and can make a difference for the company, for the colleagues and even for themselves.

The easiest way to describe a winner is a manager who continues looking for improvements and is willing to approach his or her management asking for a change.

As this change involves spending this manager is risking a lot but with the right argumentation and attitude there is nothing to loose.

When can be demonstrated that with often a small investment a large saving will be realized this can only create a win/win situation.

Think of for example tools with an annual investment of 1K, 5K, 10K or 20K where otherwise 10 times more will be spend.

Imagine you propose your management to spend 20K to save 200K. Would they look at it or call you insane?

It is noticed that while the upper management welcomes this kind of opportunities the lower management is not making the effort to inform them. Fear or disinterest?

Losers will not even think about trying. They will deny every possibility of making improvements. They do that for own (job) protection, disinterest or simply to avoid any confrontation with the management.

In fact they see this crisis as a great opportunity to say `no`. “Sorry, we are told to cut spending, so we have no budget”.

What no budget? Will your upper management postpone a decision when all computers are hit by a new virus?

"Sorry, we cannot afford to fight this virus because there is no budget, try again in six months time".

Is the economic crisis not a kind of virus? How come companies blame the economy for missing orders but not spending better on economic information for example?

It is similar to consumers who stop spending which will not help the economy recover. When companies keep on using secondary tools to "understand" economic threats, waste hours on non core business research etc, is that helping?

Is it because economic information is not important or there is no better alternative available? It does not matter because the outlook remains uncertain?

Have you really tried and compared in terms of cost/benefits or it really does not matter costs remain higher in terms of labor and fees of ´we can only contribute in good times` providers.

Unfortunately due to the global crisis there are more losers than winners. Again, this is about working winners and losers.

Where in this cost driven business climate a search for more efficiency and the naturally cost cut is a priority most managers remain silent. What is the benefit of this hiding?

Almost every company turned into a cost cutting machine to remain profitable or keep losses controlled.

While this is an old trick it has to be done but it will not be the best way to prepare the organization for a recovery. It certainly should not be awarded.

What is more important are the smaller changes like for example the attitude of employees but also secondary expenses.

Would some one who after making an effort surprises his or her management with a contribution to the new corporate strategy in the form of a cost/time saving not be better off?

Of course size matters. Big charges will contribute faster than smaller ones but the effect on the long run (economic recovery and growth will take some years) is smaller.

After cutting the large parts it is time to look for smaller parts. But here is entered the domain of the mid and lower management where there are more losers.

To be more successful a company not only needs a restructuring from the outside (immediately visible for share and stakeholders) but also on the inside (not available to public domain). A difference in looking at short or long term results.

Changes on the inside of an organization can only be done by the managers. They have to search for new tools to help lowering costs but without creating disorder or sending wrong messages to their teams, like the upper management with their large cuttings.

To do that you have to be a manager that can operate in both good and bad times. Most managers now only think of their own situation, lesser about the organization and not at all about the colleagues.

They even consider leaving the company or already accepted another job. Sure, surviving is a priority but who guarantees your next job is save? Would it not be better to become a winner?

Who says it is not possible to gain from this momentum? Can you only perform when everyone is winning and loose when everyone is losing?

Should we all feel miserable and wait till the storm is over? Stop being creative and taking initiative? Not listen to what is available in the markets because there is no budget?

Is it really true when offering the board, the higher management or whoever is above you a solution that helps cutting costs, you will be ignored?

Is it more important to stop new spending because of budget restrictions or orders from the top instead of creating a long term synergy? Is it better only to contribute to a short one?

Managers who accept it is time to stop producing, to make no further attempts and wait for the next episode have a higher chance of losing. Not only jobs but around the corner there are always winners.

Managers who can convince their bosses certain changes do not affect negatively but positively business. Managers who for example come with a tool that demonstrates a welcome ROI after the first day, week or month.

These managers can demonstrate efficiency is out there and this is the best time to find and implement it. Even when an initial investment needs to be made. Making a change is not without investment.

Investments can be small but for sure can be done smarter. Why spending 100K when it can be done for 10K? Because it is easier or the ´we are so used to this provider`excuse?

Who would not accept a change from 100K to 10K? Who would not invest 10K when this would lower costs from 100K?

Only winners will accept and will make an effort. Not because it is impossible but because it is the best alternative.

How Corporate Spending affects negatively your Corporate Planning.

During the past 12 months the global companies (read decision makers) negotiated with in regards to supporting them with essential economic data reports clearly were divided in two groups:

One group fully agreed making changes in the cost structure is needed at all means. Not only restructuring the work force or shutting down plants but also saving costs coming from non core business activities.

The other group in contrast was very determined in not spending at all but only in the core business. No chance of smarter or better spending when it comes to external intelligence, no need for additional economic data despite the worst economic crisis in their job history and certainly not willing to even look at the proposal.

When it comes to Corporate Spending is a negative impact on Corporate Planning justified? Can it easy be eliminated or limited?

My main focus will be on the second group. Not only because I disagree with their spending rituals but because I simply do not understand in this climate there is no need for better economic data combined with cost/time savings.

Current market shifts are caused by changes in the local economies and when these recover more market opportunities will occur. This will go slowly and not by one region.

When China improves the immediate affect on Korea or Malaysia will be smaller. The same for Brazil for example while recoveries from the US and Euro zone remain uncertain.

It all needs time and during this period every minute or dollar spent on non core business issues is a direct extra cost. This is not different per sector or industry.

The global crisis is not caused because of one industry. Housing and finance are related but cannot be marked as one industry. Economic data is essential in every market.

To be prepared or in better shape for potential market recovery most attention is paid to the largest efforts of cutting costs; laying of 5, 10 or even 20% of the staff, cutting salaries of executives or shutting down plants abroad. This will save millions and people actually get rewarded for it.

The irony is that when recovery takes place the staff is hired again and plants are re-opened or re-built but that is the way it is.

But what is wrong with a cost cut of 10, 30 or even 100K?

The past 12 month is noticed group two is not interested. Especially when this is regarding non core business information there is no interest as it is not seen as part of the core Corporate Strategy or Planning.

The majority is not prepared to listen or consider a change here as a contribution. Instead they continue wasting corporate time and expenses on non core business information such as economic information.

The contradiction here is that for group two good or bad times do not matter. They do not care who provides them the forecasts or costs involved. They even prefer a well known brand to “blame” for wrong established analyzes.

But they forget hidden costs like non core business spending finally reduce budgets more resulting smaller budgets. Where remain benefits?

People can only spend once in terms of time and expenses. When a too large part is not related to own business it will have a negative effect on the total.

This total includes all budgeting and corporate planning. While those who are in charge of the larger restructurings clean up the next 12 months hidden costs remain untouched.

Why?

An easy calculation concludes that in every organization operating in other international markets 10% spends corporate time and expenses on non core business information such as macroeconomics.

This 10% contain professionals linked to for example corporate / regional / country departments such as Finance, Marketing, Business Development, Country Management, Strategic Planning etc where macroeconomic data is used to complete market insights.

Per person a cost calculation will result in an annual extra non core expense of at least 1,000 dollars based on one hour per week with an average hourly salary of US$ 30.

Just multiply that with the 10% of your work force. Is that a not relevant or can be missed under the new corporate objectives?

Often current external provision is not under revision which leaves costs unchanged which is a missed opportunity. Lack of interests or lack of decision making power?

The same professionals claim not to be able to work without certain global providers of information (business / market intelligence) but are they right?

Should they not instead to complete the new program of Corporate Strategy and Planning, which is adjusted to this cost driven climate, not look for better and more efficient tools?

According to group two this is again not necessary. Conclusion;

New Corporate Planning requires new settings but this cannot only be focused on core business expenses.

When business leaders complain about the market conditions every dime saved should be embraced.

Business leaders should not hide behind the new Corporate Planning, even though this indicates more savings than spending.

All what can positively affect the corporation should be explored and welcomed; even if this is only 10K instead of 1000K.

When a service can cut down 80-90% of non core business costs of similar information and help professionals prepare for a new era of corporate growth, should that be ignored?

Group two screams about the worst performance in decades but only looks at the big and easy numbers. Their non core business spending will therefore remain inefficient in terms of costs and corporate time.

While this looks like a small issue it will finally slow down the whole corporate processing and directly Corporate Planning.

Helping improving the non core business part by spending smarter resulting from the first month in more time and assets available to core business should be welcomed.

Otherwise Corporate Spending will affect negatively Corporate Planning.