Little tales of horror spread austerity message

PUBLISHED : Sunday, 17 January, 1993, 12:00am
UPDATED : Sunday, 17 January, 1993, 12:00am

THE owner of a small but successful sales organisation recently explained how difficult it was to cut costs at his company.

In the past, when the economic picture was rosier, he and his salespeople tended to be careless about expenses. Profits were skyrocketing. Money was no object. Now, he was learning, the company had to watch every cent.

''It's not easy getting the troops to switch from a first-class lifestyle to economy,'' he said. ''They don't seem to believe in our new austerity. They think it applies to everyone else, not them.'' I'm sure this entrepreneur was not alone in his concerns. It's tough to make a sudden U-turn in everyday business practice, especially when changing those practices seems painful to your most valuable people.

Like many owners and managers, this man was struggling to cut costs without demoralising his employees.

Here are four suggestions that can help any manager introduce his troops to the ''new austerity''.

Selective monitoring.

Our company has grown well beyond the point where I can (or even want to) keep an eye on every one of our 50 offices around the world. But I can pick my spots. I can have our financial people audit a certain type of expenditure and if we find something outrageous, I can make our people aware of it.

My favourite sort of excess is the small item no one thinks we would bother to examine - because it gets people thinking: If we are looking at the little items, we are certainly looking at the big ones.

At a certain point in the growth of any company, the boss cannot personally keep track of every expense. But your people cannot be sure of that.

Horror stories.

I like to make my points with horror stories. It is now a very strong statement if I announce at a meeting: ''We are not reviewing our expenses carefully.'' Everyone will yawn and think: ''Oh no, not again.'' The point will make no impression.

But if I can cite specific examples of excess, that is different.

For example, we urge all our American executives travelling to Europe to use USA Direct when placing phone calls from Europe to the US.

All they have to do is dial seven extra digits but we can save a lot of money.

To see how people were complying with this, we audited the telephone expenses of some of our executives at a European tournament.

We learned that, had they used USA Direct, they would have saved US$800 on international phone calls. So I pointed this out in a meeting.

Doing so delivers more than one message. It not only highlights the specific savings, but also shows we are conscientious about costs and watching everything. The benefit is exponential.

Everyone in the company eventually gets the message, not just the people in the room but the people who report to them. And the message does not only refer to USA Direct.

More horror stories.

I also tend to go overboard on the horror stories. If I have 10 stories, I use them all. I do not stop at stop number three because I think our people get the message. I want to make the point this is not nitpicking. I want them to know it is serious, this is how we run our business.

Head before the tail.

I also prefer to attack the head, not the tail of the problem.

If a junior executive has some expense account irregularities, I will not personally chastise him on it. I will chastise his boss, the senior executive who approved the irregularities.

Again, that sends a double message. The senior executive will go back to his staff, embarrassed and contrite, and be more aggressive about getting everyone to toe the line.

If you want to stop the excesses at your company, first you have to identify them. Audit everyone's expenses and find as many horror stories as you can. Then show your people how they can do better.

If you want your people to take your ''new austerity'' seriously, start at the top. Cut your spending habits first.

A cost-cutting programme that starts from the bottom will not work. A programme that starts at the top will not fail.

A 26-YEAR-OLD female reader in a middle management position at a great company asked if she should go back to school to get an MBA. She wants to know if it's worth leaving her job for the degree.

I feel there's no mystical power in an MBA degree. Earning it doesn't ensure success and lacking it doesn't invite failure.

The real question is: Over the next two years, will you be better off learning all you can about your company right where you are or away to school? I don't want to seem like an MBA-basher, but I tend to be sceptical about ''learning experiences'' when they don't involve actual experience or even the right experience.

I remember an entrepreneur facing a slight variation on this problem a few years ago with his son. The circumstances were different, but the decision the son had to make was the same as our reader.

He was being groomed to take over the family business. He already had an MBA, and everyone was advising the father to let him work for a blue-chip corporation for five years so he could learn how a great company works.

Then he could join the family business.

The son decided to stay close to home. He said, ''I'd rather spend the next five years learning our business rather than someone else's''.