Every economic crisis brings forth an opportunity for change. The impact of the current recession crisis can be felt around the globe and in almost every walk of life. C-level executives have seemed to place their responses into 5 areas of concern. Reducing operating expenses would appear to have the highest priority.
Other high priorities include increasing profitability, improving customer satisfaction, product/service improvements and sustainability. But are C-Level executives focused on the right areas or is it a knee-jerk reaction as a result of stockholder pressure and a lack of vision.
Identifying the area of focus should come as a result of understanding how work flows through the organization. Work starts with the sales process, continues through the operational infrastructure and finishes with fulfillment of the customers purchase. The objective for decision makers is knowing the detail of the processes. It is the detail that will uncover bottlenecks, hindrances and the true opportunity. For C-level executives it is vital to note that these three basic processes are not independent but are in fact completely interdependent on each other.
A proper review of the workflow will provide insight on how to increase sales, which portions of the company are running inefficiently and if you have exceeded your customers expectations. Profitability and sustainability are two of the by-products of this analysis. It is extremely rare that the only solution to declining revenues is a reduction in operating expenses. The difficulty C-level executives have is not being able to see monies spent on improvement as the reallocation of funds. This is almost always a result of short-sightedness without sustainable long term benefit.
Operating efficiencies cover a lot of territory. They include sales, production, fulfillment (delivery of goods or services) and administration. The object of improving operating efficiencies is to do more with less and with higher quality. Understandably, reducing headcount without a change in procedures does not accomplish much. Headcount reductions may actually result in additional expenses from turnover, a negative moral effect on productivity and potential show-stopping events if the maintenance on critical assets are neglected. The key to business sustainability is asking what can you do better and how will we will get there? The secret is involving employees with their input.
Integrating Technological Advances
Technology exists for a reason. In the business arena, technology exists to enhance an organizations capabilities and product/service offerings. For asset intensive organizations this means that you should be using the tools necessary to optimize the useful life of an asset. In turn, optimizing the useful life of an asset is to keep it operating at the highest efficiency for the longest period of time that it is fiscally sensible. Technology advances can be anything, For pest control the advance may be a better mousetrap, for asset dependent operations these may include CMMS/EAM software, mobile handheld devices, predictive technologies and energy efficiency.
5 Common Technology Mistakes
Once a solution has been found that will increase efficiencies, lower costs and provide a long term sustainable improvement C-Level executives should turn their attention to avoiding some common mistakes. These mistakes may end up costing them more and make the successful implementation of a CMMS/EAM system fail to realize its potential. The most common mistakes are
- Approving the purchase of technology without a formal planning group that can achieve buy-in from all impacted functions.
- Purchase the bells and whistles but not the training (and continual training) required to utilize the system effectively.
- Not implementing a follow up system of benchmarks or other measurements to ensure the desired results are being achieved.
- Not involving the vendor into the solution during the planning stage. This also means that the vendor is established, sustainable and their platform is scalable.
- Being too cheap, good solutions costs good money but the ROI is more than an off-the-shelf product can hope for.
The decision to reduce operating expenses should be well thought out as with any strategic planning. However addressing the only expense portion of a business is not the only answer to sustainability. Revenue growth is dependent on sales, products (good or services)and most importantly the ability to exceed customer expectations. The economic crisis demands changes for inefficient organizations so that they may survive and thrive in the coming years. Do things better before you decide to lose headcount otherwise nothing has really changed.
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