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Article Five Steps to Using
Resources Efficiently Controlling costs is similar
to controlling other aspects of your department’s operation such as
quality or productivity. Your
long-term objective is to use money and resources in the most effective
way. To meet this objective,
you may develop immediate goals: to cut expenditures where possible, to balance expenses with
income, and to accumulate records for planning and budgeting. How are these cost-control goals put into practice? Here is a list of the basic steps: 1. Break down your costs. Some companies instruct their team leaders to identify costs according to source or purpose. Source is defined as the work order, account, or group that causes the cost. Purpose is the work order or the department that benefits from the expenditure by receiving a service or goods. This type of identification is generally set up by the accounting department so your company’s definitions of source and purpose may differ. You need to understand these terms so your department’s costs can be identified and recorded properly. 2. Understand cost classifications. Accounting often places different costs under different categories. There may be a category for salaries, another for office automation, another for materials and supplies. You should become familiar with the classifications applying to your department. Once you know why a particular item or task is placed under a certain category, you can understand and use the reports issued by accounting. 3. Compare costs. Like any other area of control, costs have meaning only in comparison with standards or criteria. Current costs may be compared with a number of measures: standard costs based on a study of office operations, prior costs under similar operating conditions (perhaps the previous year), or income versus costs. 4. Adjust areas that are out of line. The preceding steps prepare you for this final action: adjusting those costs which comparisons show to be out of line. Meet with your people and together determine the reasons that costs are too high. Create a plan of attack. Target waste and inefficiency first. Next, look for better ways to use machines, material, and people. 5. Make certain your efforts are on target. Cost-control efforts have long been part of the formula for productivity improvement because they do more than just save money. They also build greater efficiency and locate quality improvements. And the beauty of these efforts is that they can be developed by you, the team leader, to fit the needs of your department. You may see operations which are inefficient, processes which cause excessive waste, or ways that things could be done differently. 6. Recognize the Pitfalls. Recognizing opportunities for savings, however, does not guarantee that your cost-reduction emphasis will create firm results. Cost-control programs can get in trouble for several reasons. For example:
The wrong targets for
cost cutting were selected. Take
the case of the company that decided an across-the-board reduction in
lighting would save energy dollars. Instead,
productivity began to fall because some employees were working directly in
unlighted areas while some aisle locations were brightly lighted. Rather than targeting across-the-board lighting reductions,
the company should have cut light in noncrucial areas. Employees’
cooperation and participation has not been achieved.
Unless you explain a program to your people and give them a role to
play in it, they may see the program as something imposed on them by
management and, as a result, may resist making improvements.
The programs were not
pursued vigorously enough. Cost
reduction cannot be a once-a-month activity—it must be something you
strive for daily. What specific tactics can you employ to avoid
these pitfalls? Here are some
guidelines for developing a successful cost-control effort: ü
Know what your costs
really are. Keep checking
your records so you can spot a cost increase when it occurs.
If inefficiencies are the cause, eliminate them. ü
Scrutinize the major
costs areas first. The
areas where you spend the most money have the greatest potential savings.
Examine them first. ü
Make sure you are not
raising others’ costs. If
your plan boosts costs in another department beyond the savings to yours,
then it is not effective. ü Be willing to scrap tried-and-true methods. Be on the lookout for new ideas and methods that can save your department time and money. ü
Make cost control a
job responsibility. Evaluate
your employees on their cost-control efforts as well as on their
proficiency on the job. ü
Seek out
cost-reduction ideas. Let
people know you are open to their suggestions.
Discuss the topic of cost control at department meetings. ü
Get general
acceptance of your cost reduction changes.
Keep resistance down by involving people in the changes right from
the start. ü
Compare your original
goals with what actually has been achieved.
If the discrepancies are too wide, take corrective action. ü Take a personal interest in cost control. If your people know it is important to you, it will be important to them too. <End> |
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