We are currently experiencing what is arguably the most significant economic disruption of our lifetimes. A profound storm that impacts all facets. If each company is akin to a vessel, we are travelling in disparate boats. Some appear to have been specifically engineered for these conditions and are flourishing, whilst others will only endure the storm through sheer fortune. Many will sustain damage, yet they will survive, potentially emerging even more resilient.
Within each of our organisations, it is largely accurate to state that we are all in the same predicament – provided this is communicated to the team transparently and truthfully. Should this sentiment be shared, then resistance to change dissipates. Innovation, cost management, new markets; all aspects can be optimised and integrated into the strategy for preserving what is paramount: individuals and their integral role within teams that have required significant effort to establish and which few would wish to squander.
Prior to the coronavirus crisis, the perception that costs were under control was ill-advised (albeit prevalent); it is now a critical vulnerability. I can state unequivocally, based on experience, that all companies possess the capacity to reduce their expenditures without impacting personnel. Therefore, what is the optimal starting point?
Over a century ago, whilst enumerating the peas harvested from his modest vegetable garden, a gentleman observed a peculiar correlation: approximately 80% of the peas originated from 20% of the pods. Intriguingly, this aligned with another of his discoveries: that roughly 80% of the land in Italy was owned by 20% of the populace. This individual, Vilfredo Pareto, an economics professor, ascertained that this 80/20 relationship remained consistent across a diverse array of scenarios and historical contexts.
The 80/20 rule is equally applicable to general expenditures, hence commencing by itemising costs in descending order and analysing the most substantial ones represents the logical initial step. I would propose an additional measure: identifying certain "low-hanging fruit". Initiating a significant cost-reduction project with early successes, even if readily achievable, cultivates a collective sense of potential. Many vessels will founder, even amongst those that are competently managed.
Cultivating a culture of continuous scrutiny and enhancement mitigates the likelihood of becoming one of the casualties of this period. It is imperative to possess the humility to recognise that scope exists for refinement and learning. Central to the implementation of a cost management culture is the dissemination of objectives to all employees, elucidating their significance for the collective future and the desired transformation of that future. A lucid vision stimulates innovative concepts. The measurement and communication of achieved outcomes serve as the impetus for sustained progress.
