PREPARE NOW… Reduce Operating Costs and ReFocus

By Steven K. Haught, MBA

Fortune does indeed favor the bold, the decisive, the courageous. And those companies who take decisive action today, right now, before the nation is fully open for business, will be the ultimate winners in the emerging new and revitalized economy.

Costs, are the bain of every business.  When times are good, management tends to accept, tolerate and generally ignore the costs of operating the business.  It’s overhead and don’t rock the boat.  

CFOs tend to increase the operating costs by a percentage based on factors spanning the costs to operate all departments.  Leave it at that.  Simple, unless your business has been upset by the pandemic—off-track and wondering what the future holds as you restart operations.

ALL costs should be treated like a start-over, a start-up budget building process from ground zero.  If justified, they then should be viewed as an investment, not as an inconvenience or burden.  The restart of your enterprise, moving to full momentum, will take more time than many forecasters are suggesting.  So, seeing your costs for essential aspects of your business will be the foundational mindset to building a new version of your company, leading you to a stronger more resilient future.

Reviewing operational costs is an opportunity for every choice to become a strategic decision, not just another transaction. or a percentage increase applied across the board to the overall costs of operations.

As the pandemic threat winds down, the imperative to reduce costs, or at the very least review and justify, will help executive teams sharpen their strategies and narrow focuses for the short-term expanding as the future emerges and stabilizes

What if your objective is to take out 20 percent of costs? To accomplish such an aggressive reduction, you will be forced to ask the tough questions, for example: What products and services should the company focus on? How would the company deliver them to the buyer? How does the company redesign the  marketing strategy to be more effective in reaching new prospects?” 

This mindset requires you to define what differentiates your organization from your competitors. Are such drastic changes necessary? No… if you are content with the status quo. The status quo, however, is unsustainable, especially in light of the pandemic’s affect on the global economy.

Cost management and growth strategy should not be viewed as different activities. Business considerations that typically fall under the strategy umbrella, must be viewed through the lens of not only whether they support strategic imperatives but also whether they accelerate the growth of costs and by what percentage of projected revenue growth. If you do not analyze costs of operations and revenue growth together, you risk reinforcing internal processes and structures that will limit your ability to affect transformative change.

Once you’ve made strategic decisions – in other words, clarified your organization’s identity and its points of differentiation – you must change how you work to sustainably reduce costs and positively impact your operating margin. 

Technology is one area where small and mid-sized businesses lag behind the larger enterprise.  Smaller companies in particular, are working with antiquated systems that cannot perform the analyses necessary to be competitive.

Technology is a cost, but a valuable investment that enables any size enterprise to enter into a more modern era of business operations. It isn’t just about installing new information technology systems as a means to an end. Instead, it’s about realizing the full potential of “digital” – the set of process transformations enabled by a new era of big data, connectivity, and advanced analytics, artificial intelligence, etc.

Simplifying and standardizing business processes on a new integrated-connected platform accessible from all departments is essential. Wholly eliminate activities once believed to be critical and evaluate the trade-offs between standardization and customization.  

Data and analytics will enable the executive team to drive better decision making. Technology, while expensive, is offered on a monthly to annual subscription-Cloud based delivery.  Access from anywhere, at anytime will afford for real-time decision making, built from integrated data sets.  New internal tech tools will also be important for engaging vendors, clients and prospects differently.

Rejecting “business as usual” means embracing a new attitude about cost as a strategic investment, not as an inconvenience.

Redesigning core processes requires a culture and talent model that supports your new post-pandemic focus. People will be your primary investment.  They will be the ones who make you plan come to fruition.  Technology helps support them, but their enthusiasm and excitement to be part of reborn enterprise will be a powerful asset in your recovery.

Unfortunately, businesses often realize the importance of people in driving change only after the fact, once outcomes have fallen short of expectations.  Once clue here… you can have the best technology stack on the planet, but it can’t do anything for you without good people who create the data from their activities that drives informed real-time decisions.

What’s the secret to engaging people to accelerate change instead of stonewalling it? Well, there’s no single answer to that question. 

There have been thousands of books written about behavioral change. There are many approaches to making change possible and making it stick. But regardless of the approach, effective change boils down to aligning efforts against core processes, leaders’ conduct, rank-and-file behavior, and organizational incentives. Governance and change management, not organizational or hierarchical design sparks sustainable change.

Change starts from the top down.  Impact starts from the top down. Transformation will be across the organization if the owner, the CEO, the executive team are passionate about change and what lies ahead for the business.

The CEO and senior management team must be aligned on the path forward to successfully activate change across the organization. 

Ask yourself how these recommendations could will help you achieve your strategic objectives and organization’s focus, and how it can help you redesign your business processes and operating model, and re-invigorate your culture.

Fortune, favors the bold… the brave… the courageous!