Do you know where all your costs are in the Business?

Not only do we want to increase our EBIT or net operating profit as I recently wrote about and this can be done by maximising performance and productivity of employees however we can also, which most people automatically think of is by reducing costs!

Reducing costs is probably unfortunately more of a focus in business than maximising performance and productivity to increase EBIT but are the costs really where you think they are?

It is easy to look at the obvious direct and indirect costs such as travel, entertainment, stationery and maybe even training. But do you really know of all the costs involved in the running of your business including the ones that are not so apparent? And if so why aren’t you doing something about it? Have a think about the costs involved in some of which I have identified:

• Not managing or holding onto employees that are not performing?
• Not providing feedback to those that are not behaving appropriately
• Holding back on changes because of how others may react
• Allowing a poor culture to continue
• Not developing leaders
• Teams not working cohesively together
• Lack of succession planning
• Not complying with industrial relations legislation (although this is a risk not necessarily a cost)
• Not complying with workplace health & safety (again this is a risk not necessarily a cost)

I am sure we are all guilty of at least one but when action isn’t taken in any of these areas it is costing the business.

I appreciate it is not easy to deal with some of these issues that we find and often these are neglected, procrastinated or avoided but if you really think about the costs involved in the above scenarios you might not neglect it anymore.

I have witnessed many situations like these over the years however one comes to mind which I witnessed over a couple of years.  It involved a Manager that for whatever reason isn’t performing to the expected level and for whatever reason isn’t really being managed.  As a result of this ‘non-performance’ team members are disengaged and this alone is a cost to the business. Others in the business see it is not being dealt with so in some ways is creating a non-performance culture throughout the business and also the area of responsibilities isn’t getting the normal or expected levels of work and therefore is reflected in lower income streams. Furthermore, this will affect future revenue as others move into the market to fill the gap left by your business not to mention customer service.  The cost of what may appear or initially be viewed as isolated in fact has a very big flow on effect at a high cost to the business.  If we calculated the costs of this scenario to this business it would be huge and one that any Managing Director, CEO or CFO would want dealt with immediately.

Next time you decide not to take action think about what is it actually costing you not to take action.

At HR Business Direction we are able to assist with dealing with these difficult situations and maximising productivity and performance.  Contact us here.

 

Leisa Messer BBus(HRM); GradDipIR; CAHRI; IRSQ
Managing Director | HR Strategist
leisa.messer@hrbd.com.au
07 3890 2066
www.hrbd.com.au