Be Brave When Reducing Structural Costs

In contrast, it is worth taking a critical look on a regular basis at structural costs, which creep up over time.

Example: According to one narrative, there was a study in the British Navy that found that the number of officers would continue to increase even if there was not a single ship left at sea. The administration provides itself with more and more work, which can be completely decoupled from the base.

There will always be potential for rationalization in administration. Take a systematic look at what work can be added to the business process and what can be eliminated without replacement. You will be surprised how many completely dispensable tasks are carried out.

Example: A recycling paper mill, which had previously been used by RWE as a waste paper disposal point for the city of Düsseldorf, was sold by RWE to a private investor and now had to prove itself economically in the market. It was significant that the impressive portal of the paper mill listed extension numbers of more than 10 administrative departments, but sales and marketing were conspicuous by their absence.

The employees in the paper mill also had no time at all to take care of marketing and sales; they were far too busy with administrative work. An ?inside joke? illustrates the conditions that prevailed in this paper mill: The administrative staff felt that their time was taken up by a green form that had to be filled out regularly as it circulated. There was no conclusive answer to the question of who used this form and what use this completed form served. The form was filed every day with a ladder into a folder in a 5 m high filing cabinet. There it remained for all eternity.

The request to refrain from filling out this green form was met with spontaneous approval, because no one could see the point of this activity. But on the third day, the green form was back. After all, you can’t break such a long tradition …

Take decisive action if you see administrative activities in your company that obviously have no benefit for the operational processes. Talk to your colleagues and uncover the “naked emperor”. Consistently dismantle administrative activities. Bring a “start-up atmosphere” to your company that encourages forward development.

But also keep in mind that processes are becoming more complex and require more coordination activities than they used to. You should definitely support coordination activities that promote the process. Indeed, cost reduction is not an end in itself; rather, consider the challenge as cost management, comparable to risk management. Taking risks is the basis of any entrepreneurial activity. The important thing is not to avoid risks, but to deal with them responsibly. Suitable methods are available for this purpose, just as they are for cost management.

As a rule, the greatest potential for cost reduction is not found in the functional areas themselves, but in between: In the quality of cooperation, which is primarily demonstrated by the coordination at the interfaces along the business process. It is at the interfaces in processes that the performance of an organization and the motivation of its workforce are decisively shaped. Also tap into the potential offered by digitalizing repetitive administrative processes. Digital transformation can not only save you money, but above all reduce the susceptibility to errors and thus ensure process quality.

You will find further concrete suggestions here: Earnings. Earnings can be influenced not least by good leadership, which affects all strategic and operational processes in the company.

This meaningful cost management is an ongoing challenge. Meet this challenge by implementing a cost management process in your company.


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