Don't Buy Paperclips - Cost Control Lessons for Enterprises from SME's

One of the many quotes attributed to Duncan Bannatyne is that he forbade the purchase of paperclips in his businesses. This made me think. I never buy paper-clips. There is a jar in my office where incoming paper-clips are stored. I use a few every day, but the level remains constant. Large organisations focus on the major cost centres when they initiate cost saving programmes. This often results in head-count reductions - sometimes with unfortunate consequences for customer service. SME's rarely have significant numbers of staff and are forced to be a little more creative in their cost control programmes.

This attitude leads to a constant search for best value - something which is often overlooked in larger enterprises where:

• It is somebody else's money;
• Most cost saving initiatives involved a purchasing change or a policy change.

I am not knocking the top down approach to cost saving - I expect it has made a huge difference to most organisations over the last 24-36 months. I am advocating something extra.

If a large enterprise is to learn the lessons of an SME in cost control it will need to establish a culture change. This culture change has to start at the top. If you want everybody in the business to be careful with every penny, then you need to start leading by example.

Simple Steps/ Things to Think About

• Trains - split tickets - manage your arrival time in London (for example) carefully and a split ticket can save a significant proportion of the cost. My own (standard class) journey to London is at least £40 cheaper if I buy a Nottingham / Market Harborough return and a Market Harborough / London return at a discount rate for leaving Market Harborough after 09:00am. It may mean staying later in London to get everything done, but the saving is significant - especially if you have several people making the journey on a regular basis. I expect that most readers of this blog are well used to working in standard class rail carriages. The attitude of Sir Nicholas Winterton. is not exactly helpful!
• eBay/ Second Hand - whilst a large enterprise could be making a false economy by changing the IT procurement policy away from Dell or HP for PC's and servers, there are a number of expensive items that do not need to be brand new every time. Server racks for example - good condition is important, but is new essential? Most SME's locate their second hand office furniture store and buy good quality second hand desks and filing cabinets - and get something better than if they had bought new on their budget.
• Meetings Meetings Meetings - Internal meetings are one of the biggest cost wasters in large enterprises. Your most expensive resources locked in rooms, often making assumptions about the customers they no longer have time to go and see. If your organisation can only exist by keeping senior people in an incessant stream of internal meetings, you need to change. Start at the top. Think about the number of meetings and their duration. Think about making sure that you have the right people in each meeting. Halve the duration of your board meetings. Insist on information being circulated in advance - one page briefings preferably so that the meeting is used for clarification, review and decision making - not for interminable briefings.
• Internal Reporting - I once worked for an organisation which had so many matrices and internal communication routes that some senior managers spent 40% of their time compiling internal reports - usually repeating information already reported elsewhere in a different format.
• Car & Van Sharing - How often do your people turn up at a remote site, each in their own vehicle? Have you considered the cost of this? Senior people are usually the worst offenders. However, a small client of mine had 10 vans but usually paired fitters on site. By halving the number of vans and some creative thinking in the work scheduling their transport costs were reduced by a significant margin. Couple that with a good deal on weekly rental of un-liveried vans (some magnetic signs are inexpensive) and you have a flexible solution to a major cost issue. It could be that the biggest obstacle to savings like this is your "Fleet Manager" who exists to manage a fleet of vehicles.
• Bonus Schemes / Buy-In -In an SME, it is easy to make sure that people understand the cost management issues. In a larger enterprise, you might need to be more creative if your people are to be bought in to your cost management philosophy. Your main objective is to ensure that most of the initiatives are started by the people who are most affected. Nothing saps morale in a large organisation faster than a continual stream of penny pinching changes to expenses and car policies. If you have a large service organisation, get the ideas from the people who are most affected. They may surprise you. If you have a bonus scheme, you may already have the means to reward the right behaviours - you only need to facilitate the change projects.
  

The Message
Be creative and give your teams an incentive to participate in the cost saving programme - it will make a refreshing change from trying to impose yet another change to the expenses policy.

Related Articles
Seth Godin wrote a recent blog which offers a counter argument. John Crickett wrote a great article which is in broad agreement with my sentiments above. Your firm, your choices!