Waste Not, Want Not
Thought Leadership: From the CEO’s Desk
Richard Leaver, Alliance PTP CEO – To be successful, it is imperative that a business grows. The old saying, “Grow or die,” certainly rings true for many businesses as the cost of operating increases year over year. Good leaders strategize and manage growth. However, a great leader not only focuses on growth but also keeps a careful eye on expenditure. A nearsighted approach of attending to growth or cost will hinder a business in the long run. Focus must be applied to both sides of the income statement, but I want to focus on expense.
Most operational leaders are familiar with the concept of waste and the seven common types of waste (Muda) identified in a kaizen event. In addition, many understand the eighth waste of non-utilization of talent or ‘skills’ of employees.
However, I incorporate a 9th type of waste dubbed ‘unnecessary’ or ‘covert’ waste. This ninth type of waste is prevalent in most businesses and largely remains unnoticed or ignored. It is difficult to define precisely as it includes many types of expenditure that add no value to the primary business function of an organization. Common examples:
- Obsolete items. (E.g. newspaper advertising, magazine subscriptions, cable television, water coolers)
- Late fees
- Auto-renewal agreements
- Bundled services that are unnecessary or underutilized
- Consumption of services too frequently (e.g. using cleaning services daily vs. weekly)
- Purchasing expensive brands vs. generic
- Consuming and servicing goods and services that are over engineered (E.g. a premium vs. basic membership)
- Paying for a product or service you no longer use
- Using too much of a product
- Purchasing product or service out of fear of a negative impact, without sufficient ROI
- Failure to (re)negotiate
- Paying for a service or product you didn’t receive (or actually someone else’s bill)
Leaders who approve the payment of expenses assume that the products or services are necessary, appropriate, utilized, priced competitively and consumed. Unfortunately, I would suggest there are many expenses currently being incurred by your organization that fit into this category of ‘covert’ waste.
I challenge you to look more closely the next time you approve an expense!