Over?the last weekend some of us in VA Consulting team were having a?discussion about cost cuttings. We quickly came to the realization that we?have seen literally type of cost savings known and start...
Over?the last weekend some of us in VA Consulting team were having
a?discussion about cost cuttings. We quickly came to the realization that
we?have seen literally type of cost savings known and started listing the
good?and bad. The result of that list is this article. We are confident that
you?can find this useful in your cost savings efforts:
Mistake 1: ?ROI
and not just cost: In most cases we have seen people look at?only the cost side
of an initiative (Most of the time it is not their fault?and it is because they
are incentivized to behave that way by upper?management) leading to some great
initiatives being cut off. For example, a?company shut down operations in a city
because they figured it will save?them money. They did not even do a cost
benefit analysis to see how much?sales this center would cater. Leading to
catastrophic downward spiraling of?the company fortunes. The irony is that upper
management took fat bonuses as?they met their KRA for cost savings the previous
year!
Learning: Always look at the Return on Investment (ROI) and NOT
just on?cost.
Mistake 2: Move highly skilled operational domain knowledge
workers into?customer facing roles: Following up on Mistake 1 most upper
management look?at reducing people as cost savings. Then they turn around and
hire people?with different skill to grow the business in the next quarter.
Yes Josh Allen
Womens Jersey , there?are times when people have to be let go but
more often than not the cost of?letting go and rehiring is more than retraining
most of the people than?letting them go. For example if you need 10 sales people
instead of 20?operations people because you have moved operations offshore, go
ahead and?retrain the people in operations than trying to hire new people. You
will be?surprised how many good people you will get out of this effort.
Instead Yannick
Ngakoue Womens Jersey , if?you look at how much you have saved by
just the offshoring activity and fire
all the people in your internal
operations it will end of costing you more.
Learning: Make sure that you
look the complete game plan over a period of at?least six months before making
cost cuts. You might end up losing your best?people if you are not careful and
not have anyone to grow the company.
Mistake 3: Look for hidden costs in
calculating cost and cost savings:?Calculating cost can be a tricky issue. Most
companies calculate cost by?saying that they are more efficient than anyone else
in the industry and?that their internal costs are the lowest in the industry.
Literally every
company that we have worked with and worked at has claimed
this. The reality?is that they all fit into the normal curve and have the same
cost structure?as the industry. The biggest reason why most people think that
their?organization internal cost is the lowest is because they don't consider
some?of the hidden cost of operations. The commonly excluded costs
are:
1. ? ? ? Management overhead to manage the initiatives
2. ? ?
? Hiring and firing costs
3. ? ? ? Infrastructure cost (Especially IT and
communication)
4. ? ? ? Learning
5. ? ? ? Operation efficiency
improvements (Huge latent cost here)
6. ? ? ? Sales support
costs
Learning: ?Look at the industry averages and your internal costs
with items?listed added to your costs.
What we have provided to you is
information and learning in working with?several customers like you. While all
of want to think of ourselves to be?special the fundamentals of business are the
same for everyone. They are?very simple. If you look at the just the short run
or only part of the?picture it will come back and hurt you. If you need more
information on how?to improve the efficiency of your organization, please feel
free to contact?vantageAgora For Insurance Outsourcing Leonard
Fournette Womens Jersey , Insurance Backoffice, Insurance
IT Taven Bryan
Womens Jersey , BackOffice?. Waqar Khan
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