Cost management practices have been prevalent in both big and small organizations over the years.
The reasons why organization suffers, is because according to them this is an initiative they have taken for transforming their organization to better productivity and profitability. Organisations go cost cutting across all the boards, and level employees, but they fail to do it strategically, and make the cost cutting effective for the organization rather than just a transformation.
Every organization which implements the cost management initiative, have their own reasoning behind it, some say that they do it to make the right trade for long term plans, while as other believe it to be a part of their strategy for achieving futuristic goals and fuel up their growth. Once organization decides upon cost management process for their organization, many underestimate that it may go wrong as well.
We here bring to you 5 mindset shifts which can help to organise the cost management initiative effectively for your organization:
- Build a connecting link to the cost and strategies:
As the organization decides upon cost management, don’t frame it as a loss to the organization, or a major issue for the organization, rather than look at it as an opportunity towards increasing the value of the company and all stakeholders. Every cost need not be an expense to the organization. It is better, to actually link all the expenses that you do with the strategies.
- Re-define your cost, in terms of your strategies:
Every organization, has their own goals to accomplish and for those goals they have their own strategies to follow. So as per your strategies link your costs to them. Carry out the process of cost management not to just sustain your present year expenses, but aim for multi-year investments as well. This will help the organization in deciding as to what is the organization needs to do, to win the market.
- Create a Parking Lot:
Creating a parking lot means, to creating a section in which you list down all your expenses as you follow them. Once you list your expense, tally each expense to your strategy, and accordingly categorise them. This will help in clearly deciphering all cost heads.
Differentiate between Good cost and Bad costs: Once you link upon all your expenses to your strategies, create a balance system or a cost management account in which you specify all the costs, and differentiate them as per the good cost and bad cost, and spread awareness among your team towards to the good cost, so that they understand them and follow it. This will lead your team, in focusing on the good cost, which indirectly focuses on the costs related to your strategies.
- Develop continuity:
Keep a continuity in what you do. As you develop a cost management, keep revising the concept to your team at equal interval. This will keep the concept fresh, and the team will be directed in focusing on the cost related to the strategies, and thus help to curb the unnecessary expenses. The organization needs to be proactive, and needs to keep following the process that they took up to manage the cost effectively.
No process can be a one time process, and no results can be accomplished within a day. Keep continuing in what you started, as a onetime process.
Cut fat & not muscles!
Have a Transformation Tuesday!