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Action Points
I. Business Concerns in Todays Economy
6 Strategies for
Trimming Costs in
a Tough Market
Mark de Gorter
President, Power Plate North America
A. Kevin Francis
Chief Executive Officer, CenterBeam
V. Essential Take-Aways
Contents
About the Authors. . . . . . . . . . . . . . . . . . . . . . p.2
Mark de Gorter. . . . . . . . . . . . . . . . . . . . . . . . . p.3
A. Kevin Francis. . . . . . . . . . . . . . . . . . . . . . . . p.7
Jorgen Nilsson . . . . . . . . . . . . . . . . . . . . . . . . . p.9
Ideas to Build Upon & Action Points. . . p.12
Jorgen Nilsson
Chief Executive Officer, Acision
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A. Kevin Francis
A.
Jorgen Nilsson
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Mark de Gorter
President, Power Plate North America
Treating Costs as
Investments and Focusing
on the Defendable Core
As a company, we do not look at
expenses as costs; we consider
them investments in the growth of
our business. We are an organization with a strong growth trajectory, so cutting investment has not
been our primary focus; rather,
optimizing our available resources
as investments has taken the forefront in our planning.
However, the biggest challenge
most leaders face when their organization is growing is when and
how to say no to the myriad of
initiatives available. At Power
Plate, we found ourselves in precisely that position at the time I
assumed the role of president in
late 2009. Because we have a product with a wide range of benefits
fitness, health, rehabilitation,
Mark de Gorter
President
Power Plate North America
Mark de Gorter
(continued)
right move for some, and the absolute wrong move for others,
and that still holds true today. It
simply depends on your companys
Mark de Gorter ExecBlueprints 4
Mark de Gorter
(continued)
Mark de Gorter
(continued)
Trimming Expenses
If trimming your investments in
expenses becomes necessary, the
first place I look is for areas that
can be combined so that entire
initiatives are not necessarily abandoned. This could mean combining
product categories or business units
under a single leadership team,
which allows you to streamline all
the functions underneath without
necessarily interrupting the flow of
business.
Recently,
Hewlett
Packards new CEO, Meg Whitman,
did just that when she announced
that the PC unit would be combined with the printer business
Books24x7, 2012
A. Kevin Francis
Chief Executive Officer, CenterBeam
Cost Cutting
Every company drives its business
plans from a series of assumptions.
When those assumptions fail, it
often leads to the need to reduce
costs. There can be failures in
growth assumptions, competitive
landscape assumptions, investment
assumptions, and the economy
to name but a few. It is usually the
failure of those assumptions that
ultimately creates a financial exposure for the organization that
requires the organization to seriously examine whether it is going
to be forced to reduce its costs
across a variety of areas.
We hedge our cost infrastructure
by building a culture of continuous
improvement within our organization. There is a methodology that
was used successfully years ago by
Digital Corporation in Boston
called A--T. It allows you to measure any of your processes in
financial terms, whether it is your
billing process, marketing process,
manufacturing process, collection
process, etc. The method measures
the steps in a process, the elapsed
time of the process, and the labor
involved in the process. This then
lets you calculate the actual cost of
the process. This is the A step.
Lessons Learned
One of the lessons that I learned over my 40 years in business is to avoid excessive layoffs within the organization. In other words, I try to avoid having layers of
infrastructure costs. I have also learned the importance of building a culture that
empowers employees to pull the fire alarm when they see inappropriate costs. I
want the frontline employees to have a voice and to speak up at any time to any
member of the senior management team, including myself as CEO. I think it has
made a huge difference.
I have also learned the importance of celebrating cost cutting as a way of life
and as a routine way of ensuring the daily continuous improvement of our organization. By doing this the organization can remain nimble, flexible, and scalable.
Books24x7, 2012
A. Kevin Francis
Chief Executive Officer
CenterBeam
Driving a Values-Based
Culture
You must be able to drive a valuesbased culture that says it is safe to
speak up; it is safe to identify where
there are opportunities for improvement and to suggest areas where
there is a bloated infrastructure. It
should be safe to identify that the
planning assumptions are seriously
at risk.
A. Kevin Francis
(continued)
Marketing
Manufacturing
Collections
Etc.
Rewarding Employees
We use what we call the Presidents
Circle to recognize the top 10 percent of the organization on a semiannual and annual basis. They are
employees who have distinguished
themselves by making a significant
difference in either improving the
process or driving significant cost
Books24x7, 2012
AT=
Managing Layoffs
Jorgen Nilsson
Chief Executive Officer, Acision
Jorgen Nilsson
Chief Executive Officer
Acision
Jorgen Nilsson
(continued)
Streamlining Operations
and Reducing Costs
First, we have definitely had to
look at what we should stop doing.
We decided to go back to being a
messaging company, which meant
we stopped some of our lines of
business that were no longer relevant. We also examined our weak
entities and facilities throughout
the world and looked at how to
improve these. Finally, we benchmarked our business with
competitors.
Based on experience, a global
organizations tendency is to always
Books24x7, 2012
Impact of Cost-Cutting
Practices on Outsourcing
Decisions
In assessing the impact of our costcutting measures, we also examined our current outsourcing
practices and learned that our outsourcing partner for global service
deployment underestimated our
Jorgen Nilsson ExecBlueprints 10
Jorgen Nilsson
(continued)
Books24x7, 2012
Motivating Employees to
Work Efficiently and Reduce
Costs
Our most important initiative was
to develop a program that highlighted the key value for our company in line with the direction we
were taking it. We then asked
All companies:
V. Essential Take-Aways
Stronger companies:
Books24x7, 2012
Disposing of assets
Seeking outside funding
(continued)
?
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In the past two years, how has your company streamlined operations and reduced
costs? Why did you focus on these areas in particular? How has the company
benefited?
10
What benchmarks do you use to monitor your companys financial health in a tough
market? What is measured? How often?
When seeking to cut company costs, what areas or departments are you most likely to
consider first? Where can you most often potentially save?
What are your best practices for trimming costs without weakening operations? In what
ways are they similar to your industrys best practices? In what ways are they different?
How do you motivate employees to work as efficiently as possible and reduce overall
costs? How do you maintain morale when employees are asked to do more with less?
In the next 12 months, how do you plan to trim costs in order to maximize success in a
challenging economy? What do you hope to accomplish? How did you identify these
areas?
What are the top three indicators that it is time to significantly re-evaluate budgets and
expenditures to preserve the financial health of the organization? Why are these
important warning signs?
If downsizing is required to reduce costs, how do you handle layoffs? What are your
criteria for determining which staff members will be laid off?
In the next 12 months, what are the greatest budgetary or operating challenges you
expect to face? How do you plan to address them? How do these challenges compare
to previous years?
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