a view on costs

in these times when shoppers are scarce we are often looking for ways to cut or fix costs. this allows companies to guarantee the percentage return for shareholders. i was recently reminded of two ways to do this.

a friend of mine works for a company that totally “zero-bases” their budgets every three to four years. this stops costs from growing just because they were there the year before. the slightly more controversial part of this process is that it is accompanied by a condition that the new budget includes a 10-15% decline in headcount.

the other way, which may sound simplistic, could also be used to motivate staff. the objective is to compress your costs and revenue into a work day. then calculate at what “time” you start to make a profit. a recent example showed profit generation starting at 4:55 pm…pretty scary

i find this method useful as it implicitly associates costs with time. the biggest costs stand out when put into something as finite as one work day. projects can then be initiated to address specific costs. for staff, targets can be set to move the “profit time” by for example 2 minutes, which in turn is linked to an increase in profitability…