Management – 2009
Economy Downturns – A Rare Opportunity for the Smartest of Companies
Economic slowdowns yield a rare opportunity for your company to become less
expensive and much more efficient – if you know how to do it.
MARCH 2009 • Richard Ungaro, Director of Expense Reduction Analysts
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Many years ago, I had the privilege to work for Dave Thomas at Wendy’s International and I
learned that an economic downturn can be a rare opportunity to fix the broken parts (Dave
used to call it the sales prevention techniques) of an organization, reduce all unnecessary
expenses and get ready for the eventual increase that comes with all economic recoveries.
Our entire Senior Management Team was committed to constantly improving the External
Guest Experience by focusing on the Internal Guest (most companies call them employees).
When I had the privilege to work for the Wayne Huizenga group at Blockbuster Entertainment, we always focused on delivering The Blockbuster Experience to every Member (most companies call them customers) by focusing on improving the employee experience. We provided all employees 5 FREE movies per week to broaden their “movie knowledge” and in hopes that they could match our members to the movies that they would like. Every new store employee had to begin their employment on a Friday or Saturday night by standing at the door, greeting the member and handing out balloons to the kids. The reason was simple. If they could not greet and hand out free balloons, why would you want to invest time to teach them how the rest of the store works?
When I had the privilege to work with Howard Schultz at Starbucks Coffee Company, we always focused on delivering The Starbucks Experience to every Guest, every day in every store. We did that by focusing on the job enrichment and training that we provided to all of our Store Partners (most companies call them employees).
Regardless of your industry, there is a lesson to learn from these three very successful brands. During an economic downturn, your competitors will give you all the customers you can handle if you remain committed to superior execution of your front line staff – because most of your competitors will be cutting costs and adversely impacting the employee experience and subsequently degrading the customer experience.
During an economic downturn, upgrade your staff because mediocrity is most apparent when sales begin to slide – if you are focusing on outstanding customer service.
Never worry about things you can’t do anything about because you will be distracted from fixing the things that you can do something about. Regardless of your industry, your customers are most essential to your business success and your ability to survive during the most competitive economic times.
COST REDUCTION SHOULD NEVER BE VISIBLE TO YOUR CUSTOMER. Satisfied customers are the cornerstone to having a successful business. Losing one customer during a cost reduction causes even more damage to your business success. In many cases, satisfied customers can serve as an ambassador and advocate for your company.
COST REDUCTION SHOULD NEVER CAUSE SALES TO DECLINE. Increasing the customer base, increasing visit frequency and increasing the average purchase transaction must be a constant focus for all employees at every level of your organization. You only have two types of employees – those that interface directly with the customer and those that support the employees that interface directly with the customer. Both types of employees must be constantly focused on increasing the customer base, increasing the visit frequency and increasing the average purchase transaction.
PRIORITIZE COST REDUCTION ON THE IMPACT. In other words, “Never walk over dollars to pick up pennies.” A company may use overnight delivery and schedule pickups at 5:15 PM. The courier has to have its truck unloaded at the airport by 6:00 PM, so you are going to pay a hefty “late-pickup-fee” for this service. By moving your pick up deadline to 4:45 PM you can save some big dollars. One of our clients spent $1,000,000 annually on overnight delivery and we were able to save them $261,000 per year.
ASK YOUR EMPLOYEES FOR SUGGESTIONS because they come with brains at no extra cost to your company. In many cases, your lowest level employees know where savings can be found and the recognition alone will stimulate some surprising cost reduction ideas. You can reward them with bonuses or prizes. Formalize the process and ask for suggestions in writing so you have a date and author for each suggestion. If an employee suggestion saves you $20,000 annually, why not pay them $1,000 (only 5% of the savings) over a couple of quarters to make sure the savings are realized?
ASK YOUR VENDORS AND SUPPLIERS FOR SUGGESTIONS because they don’t want to lose you as a customer, especially if they are also focused on keeping you as the cornerstone of their business.
Extraordinary economic times force companies to take every opportunity to cut costs and arrest declining revenues and margins. Unfortunately, the fear and misconception being fast and precise is not possible often results in two common mistakes: trimming expenses while ignoring those “sales prevention techniques” that remain invisible to most Senior Management teams.
Richard Ungaro is a Director in Orlando, Florida for Expense Reduction Analysts, a worldwide company that specializes in reducing overhead expenses. He can be reached at rungaro@expensereduction.com
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