When do you give up? When is it okay to stop trying to help others, especially when they don’t or won’t, help themselves? How often do you run into a situation where common sense means nothing? Did Jack Welch’s system of ranking employees A, B, or C, then getting rid of the C’s offend you? Oftentimes, we are put in situations where it is better to cut losses, than to continue focusing on one person, process, customer, or problem.
Addition by Subtraction
Sometimes your team or organization can grow by eliminating instead of adding more resources. For instance, let’s say you have a problem customer that drains; engineering, operations, and quality personnels time. They spend so much energy on this one customer, that other issues begin to surface on the factory floor. New customer complaints roll in, and no time is spent on solving them, because the one problem customer gets all the attention. Good customers are ignored, while the ‘squeaky wheel gets the grease’.
How to make this decision as a leader? Just make sure you always remember it is an option. The next time your engineering or production manager asks for more resources, first look at where the current resources are allocated. Are they efficiently used? Do their actions result in higher profitability, fewer customer complaints, more business?
When hit with a P&L statement that had more red on it, than black, a former client came to me for help. How to get more business quick, was his focus. Like most customers, looking for more sales revenue to help cover their overhead, and reduce losses. Before I took the challenge, we took a deep dive into his current business. I won’t go into details, but the suggestion I made was for my client to tell his 2nd largest customer that they would no longer do business with them. I thought he was going to kill me!
After evaluating and doing a deep dive on activities, we found that 35% of the entire companies costs, overhead, & engineering resources were being consumed for 10% of the revenue. By removing the customer, temporary employees, and a little of the indirect overhead, the company was immediately profitable. Profits grew, by subtracting sales. Not only that, the engineering & operations team had more time to dedicate to their other customers. More continuous improvement activities were initiated, and within 9-months, the company had improved their EBIT from just above positive, to over 12%.
So many times we get caught up into covering the overhead, or looking at how much money has been invested already. You may have heard the saying “sunk cost fallacy” … this is where the CEO screams, “we have invested millions into this, we can’t just walk away”. So the R&D department invests millions more.
The act of saving something for the sake of yesterday, provides no positive promises for tomorrow.
Caught up in a decision that looks like this?
Maybe a business coach can help!
The Kole Performance Group will work hard with you today, to improve your tomorrow!
There won’t be any sunk costs with our team!