Cutting costs is for all seasons, but there is a great temptation for overzealous leaders to make decisions which look good but are counterproductive. There are a few ways this can happen. Decisions get made at a high level which should be made lower down, or not at all. Or a senior executive responds to a good sales approach, without having a real understanding of what the desirable features of the 'product' he is buying, or replacing, really are.
Some examples: Probably once every year or two I heard someone propose that when employees fly on company business, their frequent flyer miles should belong to the company, not to them. Sounds reasonable? After all, the company bought the air ticket. But the insightful executive will know something about how his employees travel. I know that when I was responsible for all the people supporting BP's refineries, my engineers would fly out to Germany on an early flight, work all day at the refinery, and try to catch the last flight back, sometimes getting back to their homes at 10 or 11 that night. Then they could be at work by 8 am the next morning. Likewise, finishing up a meeting in New York at 6 pm, they would head out to the airport to get the overnight flight back to London, arrive at 6 am, shower at the airport and come into work.
But just decide to take away their frequent flyer miles, a tiny perk for the weary traveller to use later with her family vacation, and we would encourage a completely different set of behaviours. At the end of a long day, why not check into a local hotel, have dinner, and take a flight the next morning instead?
Or the corporation has a contract with a tax firm to assist expatriates and the company with settling US and foreign tax. The contract has run for years, and perhaps it is a little too comfortable. So an executive takes this in hand, lets others compete, and awards the contract to a rival firm with a significantly lower bid. But did he ever think to talk with a selection of expatriates about what they liked or did not like about the existing contract? What aspect of service was most important to the employees, what was of little importance? Suddenly a small aspect of the company's operations goes from ticking quietly along to generating a storm of complaint letters. And instead of getting kudos for saving costs, the executive is in trouble for upsetting key employees trying to do a job in a foreign country, with families who have difficulty adjusting, etc.
So, yes there are savings everywhere. Yes, we have to keep searching out these savings and reviewing all our costs. Yes, we have to challenge our suppliers, including those who have been long term contractors. But think. Be sensible. Talk to the people affected. You are an executive because you have a brain.
About Leadership: About Leadership is a series of 52 columns on corporate leadership - essential skills, leading teams, managing your career, the strategic and business practices to make a company and its leader distinctive from competitors. These columns will be of interest to people leading small and medium sized companies today, many of whom have not had much formal training in management skills and techniques; for the many people in big companies who aspire to senior management; and for anyone who thinks: Give me a hint, how can I do this better?