No pressure no diamonds – is a great quote from Thomas Carlyle that epitomises a winning response towards the pressures of life. I recall being told quite early in my career that a diamond was simply a dead piece of wood put under immense pressure and this insight changed my perspective towards pressure, making it a potential force for good rather than a negative emotion caused by the overload of life.
Clearly, pressure is a relative term. When circumstances change for the worse some people can only see and feel the negative energy this inevitably creates whilst others see the opportunity it provides. Put simply some people wilt whilst others thrive. In this short piece I will explore the pressure created by an organisation being asked once again to do more with less, a reality for many organisations in the last few years and, I fear, for many months to come.
The initial reaction always seems to be to reach first for the ‘cost’ lever. Sharpen the pencils at both ends, slash all ‘unnecessary’ expenditure, baton down the hatches are the clarion calls that ring throughout the land. This sends a shiver through most people as they consider, usually not for the first time, what can be cut and what can be stopped. This ‘cut the costs’ call to arms is almost universally received with gloom, worry and despair. The more cynical mangers will say ‘here we go again’ and will watch like hawks as the scarcity mind-set begins to paralyse the organisation and the consequences and dissatisfaction of under investment and short term cost cutting begin to break out.
I contend a better response to ‘cut all costs’ is to start a ‘search for value’. The concept of value is not readily understood in many organisations as it is rarely talked about compared to the time spent focusing on costs. Value can be categorised using a simple ‘TIP’ model. Tangible value can be measured in money, time, efficiency and other measurable performance metrics and is usually well understood. Intangible value is harder to measure and is often a positive consequence of an action taken to increase tangible value. For example cutting down on regular face-to-face meetings and using video conferencing can result in savings on the travel budget which is tangible, but it also improves people’s lives as they no longer have to endure the hassle of travelling to meetings making them potentially much more productive. Peripheral value is related but not directly attributable to the benefit being delivered; in this example less travel helps reduce carbon emissions, which in time may turn out to be priceless!
When responding to the challenge of cost reductions just consider how different the response will be throughout the organisation if the call is to maximise value. The adaptive challenge (the way people respond to change) is far more interesting for people to consider than the relatively simple technical challenge of cutting costs. The reaction you want is people acting creatively and in a focused way to improve ROT (return on time); ROE (return on energy) as well as ROI (return on investment). It is in these areas that real and often substantial productivity improvements lie, improvements that once realised could dwarf those delivered by simply focusing on cost reduction. So, if you are a leader or manager faced with a call to cut costs to a pre-determined amount, how should you respond if you are going to maximise value? Here are a few thoughts to consider:
1. Be very clear on ‘why’ activities or costs are incurred in the first place. Does this activity and cost support or underpin the fundamental tenant of why you are in business. If it does – define the value the cost delivers and seek to maximise it.
2. Apply ‘T.I.P.’ thinking to each of the big cost opportunity areas and find the ones that add the most value. Doing this in conversation with as many other members of your team as you can will help to alleviate the ‘organisational shiver’ that cost reduction initiatives always create. Everyone has a unique perspective of value and the old decorator’s adage of measure well and cut once rings very true here!
3. Once you have decided what needs to be cut execute quickly and decisively and publicise success and the positive impact the change has made in order to create momentum and credibility within the organisation.
4. If people are to lose their jobs look after them well as those that remain will be watching you carefully. Remember they will be feeling survivors’ guilt so they will need your attention too.
Leaders who have the foresight and the courage to re-frame the ‘cut all costs’ challenge so it becomes appealing and compelling to those that are affected are the ones that will succeed. After all life is full of challenge and those that embrace and grasp the opportunities these challenges create are the ones that survive and prosper.