Innovation is the best way to manage costs during lean times
During lean times, the first step is taking cost-cutting measures. Most leaders will demand the reduction of expenditure to the minimum.
This is a good and important initiative, as crucial as first aid in a serious injury. It is important because it can prevent death or collapse for that matter, but in itself, it is not a solution but a stop-gap on the least.
First aid cannot solve the problem in a serious situation. If prolonged without getting down to the real solution, it will be useless.
Prolonged cost-cutting without getting to the real solution will not support growth. Indeed, it is only likely to claw back even the little benefits that may have been accrued out of the initial initiative. Needless to say, cost-cutting is not popular with the workers. Indeed, poorly managed cost-cutting initiatives drastically reduce the employees’ morale, further aggravating an already bad situation.
Top-down initiatives to cut costs are received with contempt and will be viciously fought and sabotaged. They create an “us” versus “them” attitude that is bad for morale, implementation and growth.
In humongous institutions like the government, you may require an almost parallel system to monitor the cost-cutting measures, beating the very purpose for cost cutting, for the additional system will be an additional cost.
The directives may be implemented, but haemorrhage will find another area not mentioned in the circulars and directives. This is largely because of the non-involvement of the key players and therefore little understanding of the why, the rationale of cost-cutting and therefore misunderstanding and sabotage.
Cost management through innovation, a system that will involve all employees continuously looking out for alternative ways of doing things at a reduced cost, eliminates unnecessary activities that consume resources.
This system should be supported by a reward and recognition scheme. This scheme will reinforce the employees’ efforts. It will encourage involvement and therefore reduce the general loathing of cost reduction and therefore the apathy that goes with up-down pushed initiatives. The scheme will make all employees part of the improvement process.
This kind of system will help generate ideas that are likely to leapfrog the growth of revenues, and efficiency in service delivery and gather the many talents hidden in the employees who may otherwise not get a voice or an opportunity to show their capabilities.
The cost reduction will shift to cost management and innovation. The innovations that will arise out of this initiative will have longer-term and greater benefits than any cost-reduction measures can ever yield.
Like all successful schemes, it will require a doctrine, a narrative, an appeal to the heart and emotions. It will require joint efforts, up down, down up. It must be beneficial to all parties involved and the benefit needs not be monetary.
It might even be a promise, a patriotic appeal. The scheme must be persuasive enough that it will induce a culture change. It must have role models, particularly high up who are willing to lead by example. This kind of scheme will re-examine operations across various government silos with the intention of merging duplicating roles.
The writer is the lead consultant in governance, leadership and management at Edu Premier Consulting. He has served as chairman of the panel of adjudicators for public service innovation awards under the State Department of Public service of the Government of Kenya. Huduma centre is a good example of this. It cut costs, improved efficiency, and it was not fronted as a cost reduction initiative but service efficiency improved. It has received global accolades as an innovation.
“Buy Kenya Build Kenya” was such another incentive that had similar intentions. It was well thought through. I may not be able to comment on the success or otherwise, but it had a patriotic appeal; a reason to do it.
The issue to guard here is relapse. We visit the rehab for cost savings for a while and then relapse into an even greater indulgence. This seems all too familiar. There is a need for substance, which can only come from the suggested cost management and innovation schemes, a sustained clarion call complete with champions to constantly remind each other of the need for prudent expenditure, and most importantly role modelling from the top. If I am to tighten my belt for someone else to release theirs, then it all becomes a circus.