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!

Lies Lose Sales

Sat at a desk in a client's office the other day, we were interrupted by the telephone. My client's sales manager took the call. The caller (having selected our sales line) asked for the Tech Support manager by name. The caller was, politely, advised that we needed to find the Tech Support Manager but could we know who was calling. Fred Smith from Blogs & Co. "Is he expecting your call?" "Oh ye" came the answer.

After a walk to the next room to find the Tech Support Manager engrossed in the weekly team meeting (the one where all unresolved trouble tickets are reviewed), our caller was advised "He is in a meeting. And he says he was not expecting your call."

The caller then said "no he wasn't, but you are a salesman, you know the game of saying anything to get past the gatekeeper."

So, we have an expensive resource ensuring that my client will never do business with his employer - because he lied. They may have a fabulous proposition which, at some more convenient time, the Tech Support Manager may have found compelling.

It was a stupid lie too - one that was easily found out.

The lesson: If your sales people are so weak that they resort to lies to try and con their way past gate-keepers you have a real problem. Gate-Keepers are good people doing a variety of jobs - always with the best interests of their employer at heart.

Make sure that your sales team have a short introduction which includes your compelling USP - that anybody can understand. Then you will often find that the internal meeting only lasts an hour every Tuesday and a call back later in the afternoon on another day will see your call put through. It will not always work, but it will give substantially better results than telling lies to gate-keepers.

Do your target clients know what you do?

In their eagerness to set out a comprehensive list of services some businesses fall into a common trap. They claim to be experts in too many things.

Many businesses, especially those in their early stages of development, offer too many things to too many people. They fail to specialise, with the result that their target customers become confused as to what they offer (and to whom).

Why is this important?
The human brain is a wonderful and complex filing system. Our brains work on a system of associations. We need to know how something compares with something we already know before we can index it. On-line and paper directories are organised around these things. Good old yellow pages are a classic example. Finding a business is much easier when you know which category it is in.

Most successful businesses have a real understanding of what is special about them – what their Niche is. Niche marketing is all about narrowing your focus... specialising... establishing yourself as the expert in a tightly focused range of products or services.

Your niche is the place in which you have a natural competitive advantage because you occupy the right place in the right business category.

Know what you do
You must be clear in your own mind about your lead offer - before your customers and prospects can easily work out what you do. This is easier for some than for others. It is always worth the effort.

Express what you do in one line
If you need to qualify and explain, then you may still leave your prospects in doubt as to where your real expertise lies.

The good news
You do not have to turn away work that is not totally within your declared specialism (as long as you stick to work for which you are qualified). If you are busy, there may be a justification for starting to be fussy – perhaps using price as the mechanism to discriminate.
The point is to refine your proposition to the market so that clients and potential clients can label you. When people can label your business, they are much more likely to enquire about your products and services. What really counts is your passion and consistency in promoting your core products and services to your chosen target customers.

Be brave
If business starts to fall off, it is easy to fall into the trap of becoming a generalist again. Your specialism may need to be refined, but having the courage to stay specialised will pay.

We All Need A Fool

The most common root cause of failure in business is:

The failure to act on alarms and indications of problems because they come wrapped in opposition to "The accepted wisdom".

The Accepted Wisdom
This is the company position on something. Usually defined and planned to a degree of accuracy only possible when the White Board is nearly full or there are only 2 sheets of paper left on the flip-chart.

You Need a Fool
In 1995, British Airways appointed Paul Birch as the official BA 'corporate jester'. An entertaining and thought provoking speaker, Birch tells the story of approaching his director of corporate strategy with the idea. His justification was that an official jester might play a useful role in the company, just as medieval name-sakes had done in royal courts. The logic was that the modern board of directors is a bit like a medieval court, where no one questions the king or senior courtiers, because "they have become far too important for anybody to challenge ... as long as they can't possibly be wrong, they can continue doing the wrong things all the time and never know it".

Who Do You Use
If you are really lucky (or a great Leader) as an MD, your team will automatically perform this role for you. You have created a board environment where people feel able to challenge the consensus. People in your team will take it in turns to call for a sanity check - to make sure that your leadership team is not in danger of becoming a stampeding herd heading for the next corporate disaster.

Most organisations will have to work at this. Some will need an external input. In the form of a Board Mentor or Non-Executive Director (NED).

External Catalyst
Use the right external help, with a balanced perspective. And the ability to work alongside your team and to ask the awkward questions. Then your team will make business decisions based on facts and data more often. Relying a lot less on intuition and herd instinct.

Viral Brand Damage Limitation

Businesses and organisations who care about their brands take a number of steps to develop their brands and their reputation. They usually spend a lot of time, money and energy on design, registrations and promotion. Many go on to survey their audience to ensure that their brands are recognised and are associated with the intended image.

In this world of social media, just as it is feasible for ingenious brand owners to promote their brand using the power of the internet and the social media, so it is now entirely feasible for your reputation to be damaged by the same social media. This why Tweets about certain brands will solicit a fast reaction and a correction. A recent set of Tweets on Asda’s on-line store shows that they not only monitor Twitter for their brand, but take pro-active steps to contact people and to ensure satisfaction. NHS-Direct also monitor Twitter for negative comments and make an attempt to fix things – although a simple Twitter reply with a link to a generic comment web-page is not in the same league as Asda’s recent reaction. Similarly, other brand owners seem to be totally oblivious to the power of the web, including forums and Twitter.

If you type “Land-Rover Discovery 3” into Google and then go to the second site in the natural listings (www.disco3.co.uk/forum/) you will find a forum which, on 4th January 2010, included 1077 posts on faults and fixes for the Discovery 3 model and 398 posts in the same category on the recently launched Discovery 4 model. It may be that not all of these represent manufacturing faults, but would you buy an expensive car after reading this lot?

My point is simple. It is now a lot more important for brand-owners to be sensitive to customer opinions. They may conduct surveys; they may take the feedback from those surveys seriously. But, how many brand owners actively seek out dissatisfied customers? These are the dissatisfied customers who find it so easy to publish faults and foibles to the global internet audience.
People usually vote with their feet – and change to an alternative brand if they are unhappy. Unfortunately, some of our purchases fall in to the “too expensive to dump it and move on” category – especially in a recession. So we are forced to stick with brands we are unhappy with and to tell the world – damaging brands in the process.

Suggestions

• Make it your business to actively seek out unhappy customer comments in the social media world. Speak to your customers.
• Show them you care.
• Put things right – over and above the warranty if required.
  - Do this before they build a huge following who are just waiting for the next public notice of some issue or problem.
• Consider developing KPI’s on your brands appearances in social media with positive, neutral and negative comments.
• For something more structured - take a look at a post on Creating Customer Delight
• Or, read: Richard C. Whiteley, The Customer Driven Company, Perseus Books, ISBN 0-201-60813-8

Skills Shortage?

2009 has been an interesting year.

One of the issues faced by many businesses, especially medium to large businesses, is a shortage of critical skills. In some cases, key skills have been reduced by cost saving programmes.

Cost saving projects often lead to roles being made redundant. Where this results in head-count reductions in support or overhead areas, the process adopted is usually viewed as the least bad option by a business struggling to shore up weak finances. However, it is possible that the result is a substantial reduction in the expertise of the business in key areas.

If these roles were truly unnecessary, they should not have been filled with people - even in good times. To cap it all, if numbers start to improve, reinstatement of the individual who has left through redundancy is tricky. You may be uncertain of the sustainability of any up-turn. Your business may have evolved to the point where you would prefer to avoid re-employing the person who left (If in doubt, take professional advice on the employment law issues).

One approach worth considering is to hire a part-time functional expert. Someone with the skills you need - but for, say, 2 days per month. Hire the right person and you will:

• Still save money
• Make best use of the unskilled / semi-skilled support people in your team
• Be able to reduce or cut the cost of this resource at short notice without worrying about the costs or complexities of UK employment law.

There are many, highly skilled, people to choose from. Make sure you verify their expertise and that their terms of business give you the control you need.

Cheaper Marketing Costs More

Talking to a marketing agency I know this morning was an education in cost wasting. My contact had just spent a whole lot of client time - much of which he cannot invoice - sorting out a file sent to him by a client. His plea "bring back professional marketers, they save me time and my clients money".
The leaders of many organisations try to save money in their marketing by not employing a marketing professional. They then ask a well meaning, enthusiastic, member of the team - with no marketing experience - to manage external agencies. The result is an unclear brief which constantly changes while the creative agency works hard to try to deliver value. The information is often passed to the agency in a format - in Publisher for example - which is very time consuming for an agency to extract into their professional systems. The final outcome often costs a lot more than was necessary.

The Solution
If you cannot write a clear brief and format information with clarity - so that your agency can deliver effectively for you, then use a part-time professional marketer to manage your marketing. The extra expense will be saved time and time again when your sub-contract providers are able to work to your real requirements and to deliver work that reinforces your brand and meets your objectives. Simples!