Can anything good come from cost-cutting? Usually, it’s associated with lean times-trimming products/services to stay afloat (or maximize profits). Whatever the reason, it’s often the customers who feel the effects, and that’s the reason cost-cutting gets such a bad rap.
This is unfair. Part of running a successful business is streamlining costs, but how a company approaches it can dramatically change how customers feel. Done right, it can even be a good thing. That’s where kaizen, a Japanese term meaning “change for the better” comes into play.
As a business consultant, I collaborate with companies in New York, Chicago, and Toronto. Cost-cutting is often a part of my goal. However, for most companies, the process usually goes a little something like this. First, there’s the analysis (tracking everything to death). Then the cutting starts, driven by mandates like “reduce labour costs by 10%.”
So, how do you cut costs while keeping customers happy? The answer is complex in its simplicity. Greater efficiency-incremental changes that make operations more effective. In a nutshell, it’s necessary to reframe cost-cutting and shift away from money saving as the focal point. Rather, the approach considers approaching it from the perspective of making the company better and stronger, so that greater cost reduction/efficiency is a benefit.
How does this happen? As a business consultant, when I’m hired to save money, I advise it’s always best to approach the situation from the customer’s perspective. It’s imperative to keep customers insulated, no matter what’s taking place inside the organization. For example, I recently worked with a client in New York who had taken the traditional approach to cost-cutting. The fallout was a drop in customer service. There were more complaints–both call-ins and emails. They needed more time to manage these. The reputation of the company suffered, jeopardizing existing revenue levels. It became an expensive way to save money.
Team members did their best to mitigate the situation. Attention was scattered as front-line workers jumped between managing customers and complaints, trying to keep everyone happy. It was not sustainable. My challenge became figuring out how to keep labour affordable without compromising customer experience.
The solution is to approach cost-cutting from an entirely different angle. Cost-cutting is NOT the penultimate goal. The real objective is to make the labour and supply chains more efficient so that cost-efficiency is a benefit. This is kaizen–continuous improvement through incremental changes.
By leveraging the principles of kaizen, I worked with the company to identify the issues impacting customer service. Through simple labour redistribution, we managed to reduce time and enhance service levels, which had two incredible benefits:
Kaizen allowed my client to do more with less. We were able to drive growth through improvement so that budgeting was no longer an issue in this case. And the real benefit–customers never felt the cost-cutting measures. On the contrary, improved service and efficiency allowed the company to drive growth and revenue, which meant happy customers and even more business.