In the run up to the General Election the various political parties acknowledged that severe cuts in public spending would be required to bring the budget deficit down to more acceptable levels, but almost all added that this would be done in such a way as to “protect front-line services”. What constituted a “front-line service” was never explained, and it is interesting to note that the rhetoric has now changed, with politicians preferring to talk about “essential services” instead.
The problem is that the only services members of the public ever see are, by definition, “front-line”. So the assumption is that huge cuts in expenditure are possible without any of us ever noticing, in which case the question has to be asked, why did all this unnecessary cost exist in the first place?
The explanation lies in the fact that in the good times it is easy to become inefficient. This is something that affects us all – public sector, private sector and even personal sector. For example, how often have you eaten out, ordered a take-away or bought a microwave meal simply because you couldn’t be bothered to cook?
I am not trying to suggest that treating yourself to a meal out and being inefficient at work are the same thing, but we should recognise that it is the same mentality that makes us feel that we can afford life’s luxuries in our private lives, that causes us to ease off on cost control in our professional life.
This problem of inefficiency is therefore not simply an issue in the public sector; it is something that affects us all. But how does it happen?
The first reason is because a huge proportion of new investment decisions are both poor and inefficient, with the organisation frequently losing sight of the objective and instead becoming obsessed with the process. I saw a great deal of this when I worked in the IT industry. Companies would issue invitation to tender documents that restricted our ability to respond on the basis that by forcing the competing supplier companies to all answer the same questions made it easier for the purchasing department to compare one with another. But in reality, we were not all the same and this approach simply limited our ability to put forward alternative solutions that could have been more efficient.
In one exemplary case we had been approached by one of the Virgin companies to discuss a solution for a new business. When Sir Richard Branson held a review meeting with the new business management team they told him that they had found both a software and hardware supplier that would be able to meet their needs. He asked what the next step would be and was told that they would issue a tender document to be sent to all potential suppliers.
Sir Richard asked them how long that process would take and what the benefits would be? The response was that it would take around six months and the benefit was that they would ensure that they would be able to purchase the system at the best price possible.
Sir Richard’s response was to tell them to simply buy the system and to not bother with the tender process. He went on to point out that his objective was to launch a new business, not to negotiate with IT suppliers!
The second reason is because it is all too easy for managers to become complacent, believing that the way things are is the way things need to be. In reality, technology and the market change at such a pace that managers should be regularly questioning the current processes, procedures and resourcing plans to see if there is a better way.
In the 1990’s, when Jack Welch was CEO of GE, he was so worried by the rise of the internet and the possibility that young internet-savvy entrepreneurs would discover new ways of competing against them, that he created a new department within the organisation to “think the unthinkable”. Their job was to look at all the GE businesses and to see if they could invent new business models or processes that would be capable of radically altering the cost model.
While this was in part a defence mechanism to ensure that they were prepared, it was also a means of ensuring that the various business unit managers were never complacent about costs. How embarrassing would it be if, as a leader in your field and the highly-paid leader of a significant business, an upstart wiz-kid straight out of college could find a means of reducing your cost-base that you had overlooked?
We have just been experiencing tough times and you may feel that you have cut all the costs you can from your organisation, but while the Government set about cutting expenditure by £6bn, don’t sit back on your laurels and assume that you don’t have a challenge also. My golden rule is simple; if it (whatever “it” is) doesn’t increase sales, cut costs, improve customer satisfaction, improve employee engagement or meet a governance or legislative requirement – don’t do it!