There’s an old saying that says you have to spend money to
make money, actually, there’s one additional requirement—you also have to spend
it wisely.
Profits are made by creating value. It is people putting
materials, equipment or service together to create products that are worth more
than they cost to produce. If a consumer finds that their cost is not worth the
value they are getting they won’t buy it. It’s a process that requires good
value judgments and cost control up and down the line. Anyone who doesn’t do
his or her best to contribute doesn’t realize what business management is all
about.
Controlling costs requires a team effort. You, the manager
have to instill a cost conscious attitude in each of your employees. You have
to watch every dime spent, every move made, every item, used all the time. Now
this might make your employees that they cannot take risks and of course we
want our employees to think for themselves. If you are a cost conscious manager
they will know that and when they make a purchasing decision it will be in the
company’s best interest. When making decisions on spending think first “do I
want it?” or “does the company need it?” When making the decision you have to
think that it has to benefit the company you work for and the customer. It
cannot benefit one and not the other. This is easy to say and hard to do. When
people want to spend money for new equipment or a new program, it’s tempting to
easily exaggerate the potential savings just to make the purchase. This is when
you have to think “do we want it or do we need it?” It might be a newer piece
of equipment but is it really going to save the company money?
Many employees don’t really see how their everyday work
affects costs or profits. Their jobs may seem far removed, or they may feel
their own effort doesn’t really matter. They may believe that costs are
something handled in the accounting department.
The plain truth, of course is that whether a company is a
high or low cost producer depends on everybody’s work. It’s a boss’s
responsibility to inform his people and educate them that big savings come from
little savings multiplied over and over. They have to understand that your
decision on spending not only considers the benefits but the benefits versus
the cost.
People need to be cautioned not to make needless mistakes,
waste materials, hoard supplies, or otherwise run up unnecessary expenses.
Sometime you have to remind them that money doesn’t grow on trees and the
company can’t just print it.
Some employees are careful by nature and others couldn’t
care less. When you do job appraisals make sure to include cost savings
measures in it.
