Let’s say that you own some stocks and today, you don’t look to how they are doing. Or, let’s say you drive a large SUV that gets 12 miles to the gallon – you have been talking about trading it in for something hybrid [but not today]. Or, your shoulder hurts and you have been thinking about seeing a doctor [but not today].
You may not realize that in each of these cases, you have actually made a decision – a decision to do nothing.
In the case of your stocks, the decision is that you will live with whatever happens to the prices of your stocks today.
In the case of the hybrid, the decision is that you will continue to pay at least twice as much as you could for gasoline.
And, in the case of your shoulder, you may not realize that you have torn your rotator cuff and if you wait a couple of years, they can no longer fix it [my true story].
Our thoughts…
Last week I mentioned that it would be better to do something now and fail than to study it for a couple of years to make sure you are doing it right. Even if it fails, you will learn enough to make the proper decision later.
This week, we are talking about the costs associated with making a decision. Once you have identified the processes that matter to your company - the ones that cause the most pain or the most expensive ones. Gather the costs associated with these processes – let’s say they are $X.
Your Decision Alternatives
Do nothing – Your Company will continue to spend $X. These extra expenses will continue to reduce your company’s profits each and every month.
Fix the problem – You identify a person to manage the project; You identify the plan to improve and automate the problem; And you select the most cost effective solution that will support automation and optimization. End result – costs are reduced by some amount less than $X and your profits rise by an amount similar.
In the high flying 90’s when companies were making all sorts of profits, they didn’t spend much time looking to reduce costs. Today, the economy has slowed significantly; it only makes sense to tackle cost reduction.
Your Thoughts…
Or does it?
You may not realize that in each of these cases, you have actually made a decision – a decision to do nothing.
In the case of your stocks, the decision is that you will live with whatever happens to the prices of your stocks today.
In the case of the hybrid, the decision is that you will continue to pay at least twice as much as you could for gasoline.
And, in the case of your shoulder, you may not realize that you have torn your rotator cuff and if you wait a couple of years, they can no longer fix it [my true story].
Our thoughts…
Last week I mentioned that it would be better to do something now and fail than to study it for a couple of years to make sure you are doing it right. Even if it fails, you will learn enough to make the proper decision later.
This week, we are talking about the costs associated with making a decision. Once you have identified the processes that matter to your company - the ones that cause the most pain or the most expensive ones. Gather the costs associated with these processes – let’s say they are $X.
Your Decision Alternatives
Do nothing – Your Company will continue to spend $X. These extra expenses will continue to reduce your company’s profits each and every month.
Fix the problem – You identify a person to manage the project; You identify the plan to improve and automate the problem; And you select the most cost effective solution that will support automation and optimization. End result – costs are reduced by some amount less than $X and your profits rise by an amount similar.
In the high flying 90’s when companies were making all sorts of profits, they didn’t spend much time looking to reduce costs. Today, the economy has slowed significantly; it only makes sense to tackle cost reduction.
Your Thoughts…
Or does it?
posted by Scott Cleveland at 1:03 PM
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