How to Create a Culture of Cost Savings and Cost Consciousness
Many CEOs and CFOs have a sense that their organizations can enhance cash flow and cut costs, even to the point of hiring costly advisory firms to find solutions. In fact, the best way to enhance cash flow and a cost-efficient culture is to actively involve not only your employees, but customers, distribution and supply chain partners.By Bruce Bolger
Click here for links to information about EEA engagement solution providers.
Employees and other stakeholders often know about many areas of potential waste and inefficiency, and yet few organizations take advantage of this valuable brain trust. Ironically, the effort to create a culture focused on enhancing cash flow and cost savings costs little in terms of financial outlay; however, to be effective, it requires CEO and C-suite commitment, plus the need to integrate the program into training, communications, collaboration, appreciation, recognition, and rewards, and results tracking.
Creating a culture of cash flow and cost management goes well beyond the proverbial suggestion box. It requires a CEO passionate about building efficiency and quality into the organization at every level, and providing all relevant stakeholders with the voice, agency, tools, processes, reinforcement, rewards and recognition and feedback necessary for making meaningful suggestions to reduce costs, enhance efficiency and speed up cash flow.
Ironically, creating a culture of cash flow and cost management can help harmonize the interests of all stakeholders toward a common purpose, goals, and objectives that helps enhance the understanding of how the different parts of the organizations work together to create value for customers, both external and internal. Recommendations to enhance cash flow or reduce costs that have offsetting impacts on the interests of other stakeholders and issues, such as quality and service, quickly become apparent.
Here's a step-by-step guide to establishing a culture of cash flow and cost management.
Caveats: The effort will fall short or fail if:
- The CEO, senior, mid-level and front-facing managers are not fully engaged;
- The effort does not become part of the culture;
- Quality or internal or customer service falls as a result;
- Siloes between training, communications, and rewards and recognition efforts prevent a holistic approach;
- The process for managing all suggestions is not prompt and efficient, or
- There is a lack of appreciation expressed for participation, regardless whether a suggestion is adopted.
- What does the organization seek to gain in terms of enhanced cash flow and cost savings; what is a reasonable expectation for performance improvement without undermining quality and service.
- What areas of the organization and which stakeholders are likely to have the most impact on achieving the goals.
- What information do these people need to know to make meaningful contributions and how can it be delivered over time.
- Who specifically is qualified to evaluate the different types of suggestions and how can this process be fit into their job assignments.
- What are the criteria for determining if a solution is practical; what is the nature and time frame for the projected return on investment; what investment of money or time is required; what risk if any does it create.
- Identify who will manage the day-to-day process, coordinating the communication; learning; evaluation; recognition, rewards, and appreciation; collaboration, if involved, measurement, and feedback.
- Develop a formal business plan that outlines: CEO, senior, and mid-level management responsibilities; how the effort will be embedded in communications, learning, and even management compensation if appropriate; the evaluation process and reasonable evaluation cycle-times; gainsharing, rewards, and recognition strategy and tactics, and measurement.
Probably the most important aspect of any cash- or cost-management effort is the evaluation team: the people responsible for evaluating and implementing ideas. Not only do they need to have the necessary qualifications and authority to take action, they need to have clear business rules about the time needed for evaluation and feedback to everyone who submits ideas. Anyone who submits an idea should receive immediate notification that it was received and also a status report on the outcome: whether it was it or was it not accepted and why.
3. Provide ongoing “drip” training on different aspects of cash flow and cost efficiencies to promote ideas.
- It is unlikely that all employees understand everything that contributes to enhanced cash flow and cost efficiency, or that they will absorb a lot of information on the subject in a single sitting. Therefore, the effort needs to include an ongoing process of dripping nuggets of how-to information to all stakeholders through the organization’s already established learning and communications platforms.
- It does not help to communicate an effort to enhance cash flow or lower costs without providing relevant stakeholders with the information they need to identify opportunities.
- Most effectively conveyed through nuggets and even basic gamification, if available through the organization’s learning platform, such learning includes: what is cash flow; what are the factors that affect cash flow; in what part of the organization or processes could one potential find ways to enhance cash flow.
- The same learning needs to support cost efficiency, including how to find cost-cuts that actually enhance efficiency and service or at least make sure that cost cuts do not have unintended consequences.
- Any major initiative in an organization requires ongoing two-way communications and reinforcement.
- Consider giving the campaign a formal name and logo to get attention.
- Highlight the campaign at organizational meetings.
- Regularly remind stakeholders about the campaign with suggestions on what kind of ideas to look for.
- Highlight suggestions that are being implemented and the people who submitted them.
- Publish periodic progress reports.
- Make sure the CEO is personally involved with recognizing people with successful submissions and expressing appreciation for all those who participate, even if the idea was not approved.
- Make it easy for employees to provide feedback on the program and respond to it in a timely fashion.
The complexity of humans goes beyond hamsters in a cage. The best outcomes are assured when one considers both intrinsic and extrinsic motivators.
Intrinsic: Active listening, expressions of encouragement, understanding, and appreciation; acts of support by management of employees.
Extrinsic: Tangible rewards clearly distinguished from compensation that can be marketed across the organization and that are proportional in value to that of the idea. These rewards can include desirable merchandise, travel or other experiences, gift cards, etc.
6. Measurement
Evaluate the effort on a monthly, quarterly, and annual basis, making sure to track not only the outcomes but the process—evaluation, communications, and training, etc., involved with implementation. Programs often fail because of poor implementation of one or more of the necessary engagement factors.
Enterprise Engagement Alliance Services
Celebrating our 15th year, the Enterprise Engagement Alliance helps organizations enhance performance through:1. Information and marketing opportunities on stakeholder management and total rewards:
- ESM Weekly on stakeholder management since 2009. Click here to subscribe; click here for media kit.
- RRN Weekly on total rewards since 1996. Click here to subscribe; click here for media kit.
- EEA YouTube channel on enterprise engagement, human capital, and total rewards since 2020
Management Academy to enhance future equity value for your organization.3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.
4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.
5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.
Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230.
