BY: ALEX SCOTT
After nearly eighteen months of functioning in survival mode, we are seemingly, at last, getting on top of the pandemic. Businesses have been suffocating from severe inertia due to forced lockdowns across whole sectors of commerce that have gone into virtual hibernation. After months of just surviving, it’s time to shake off the malaise and take business forward. It’s also time to take a close look and understand what it’s costing to delay improving things.
Stagnation v Transformation
The easy route is do nothing. Hesitate, stagnate and avoid the pain of change, but this is costly. It’s common for organisations to simply cope with their current situations and avoid or delay required changes or upgrades. This delay is typically rooted in a fear of the effort and disruption the change may cause, particularly after the pandemic
The cost of inaction is the business and opportunity costs associated in not deploying necessary changes, which can seriously damage your bottom line. Many businesses have recognised that they are struggling with their current situation, as they emerge from the pandemic and face many uncertainties. They are equally aware that they need to do something, nevertheless they postpone necessary changes for one reason or another. At some point, of course, any business, whether its growing or still recovering will be forced to make a switch. All too often, that tipping point comes too late, long after the pain of doing more of the same has outweighed the pain of change. Change is not just about money. It’s about opportunity as well. You have to ask yourself, what are you leaving on the table by not taking action to save money?
What is it costing you to hesitate?
If you were to take the plunge and make the changes your business needs, directly and indirectly to your underlying costs, what savings would you make? Would you see a return on that investment? To help you get an answer to that, you will need to first quantify your situation by using a few key metrics. Change is the pain part. It’s hard to quantify pain. As frustrating as it is, the conversation needs to go well beyond pain to expose the problem in terms of money, lost opportunity, reputation and efficiency.
Checklist – Measuring the Cost of Inaction
These are the direct costs that can be quantified by:
1. Real and quantifiable efficiency gains
2. Asset reductions through consolidating systems
3. Reduction in cost overruns
These are the indirect costs that are harder to quantify, but nevertheless, are very real and can’t be discounted. They can be measured by:
1. Avoiding costs introduced by a lack of visibility
2. Avoiding costs introduced by teams working in silos. In other words: a lack of collaboration and communication. The inability for staff to share workflows, documents and data introduces numerous productivity and quality issues
Cost of Quality:
Quality issues are prevalent when there is significant deterioration in a product or service’s expected performance or appearance. These can be caused by:
1. Quality and consistency of your processes
2. Quality of the data being used to make key decisions
3. Quality of the information received from vendors, and your ability to substantiate that information
4. Cheap, fast or good. Your ability to deliver your product or service on time, on budget and at a high degree of quality is dependent on more than just the capability of your staff. Your staff need the right tools and processes to perform at the level of quality you expect.
5. The cost of what gets missed. If you’re relying on a cobbled together solution to get answers, you and your staff are going to miss things. A lack of transparency and visibility can lead to key deliverables flying under the radar and lead to quality-related issues and costs.
Opportunity Lost: If your staff are spending significant amounts of time engaging in mundane tasks and firefighting, they are not available to be deployed in value added tasks or new opportunities. Staff productivity is essential for business growth.
Missed Savings: It’s very common for companies to overlook the most obvious places to make savings – particular with indirect costs in the procurement cycle.
Inefficient Systems: This area always leads to missed savings opportunities, in terms of poor processes.
Takeaway So here’s the issue. You don’t know what you don’t know. A lack of knowledge can be expensive, by simply not being able to identify hidden costs or issues, particularly when you are busy.
This is where high level expertise comes in. Knowing what to look for is critical, and this where Auditel can help.
With expertise in over 100 cost categories, Auditel’s subject matter experts can review every cost category in your business. Why not let our experts uncover the savings that are waiting for you right now while you drive your business forward?