Every month at Thought Ensemble we have a company-wide “Thought Meeting” focused on a specific topic that impacts our clients. Our most recent topic was Lean, and the discussion focused on how any company can apply Lean principles to their work, even if their work has nothing to do with manufacturing.
It was a great meeting and much of the conversation focused on eliminating waste within an IT organization. It struck me just how much waste goes unnoticed within IT, and how much time and money could be saved by actively focusing on reducing that waste.
Cost pressures are a reality in most companies and in that reality most companies will typically start cutting cost in areas ripe for reduction: contractors, unnecessary assets, and new projects/purchases. When this fails to generate enough savings (within a short period of time) the ante is upped to include headcount reductions, which often require mandatory (sometimes percentage based) cuts across the organization.
While percentage based cuts may feel equitable (why should one organization be cut deeper than another?) there is rarely any analysis done beforehand to see where the fat (or waste) truly exists within the organization. As a result, some areas remain overstaffed, while others that were more lean to begin with, are crippled.
What if when faced with the need to cut costs, you focused on reducing waste rather than heads? What if you engaged your employees in a campaign to identify unnecessary meetings, underperforming processes, and wasted effort? While this would require more time, effort, and creativity than an across the board percentage based head cut, your company would likely emerge re-energized and more effective (rather than skittish and disengaged).
My colleague, Parimal Patel, was able to save roughly 140 jobs at a past client by reducing waste instead of just cutting heads. The client was committed to cutting cost, but luckily, was also committed to finding creative ways to reduce it. If you too are interested in taking a Lean and creative approach to your cost reduction, some areas to consider are:
- Eliminate waste to reduce cost – Look at the eight types of waste mentioned in the Lean methodology and consider where waste may exist in your organization. While waste within an IT organization may be less tangible or obvious than within a manufacturing organization, it certainly does exist. My colleague Jamie’s blog is a great place to start for thoughts on how Lean waste types often manifest themselves in IT organizations.
- Streamline your processes – Cross-functional processes often begin with the best intentions, but can quickly transform into cumbersome, bloodthirsty beasts that require excessive handoffs and approvals to survive. Try taking a fresh look at your processes and asking, “Why?” (ideally you should ask 5 levels of why). If you run out of answers that tie directly back to helping your customers, then you’ve found an area for improvement.
- Review and reduce your technology portfolio – As a company grows, so does its technology footprint. Many organizations hold on to aging technologies past the point of usefulness (and reliability). Look for opportunities to improve performance by updating outdated technology. Also consider your applications and evaluate redundant tools/unnecessary licenses. Significant cost can be saved by narrowing the number of tools in use and/or getting rid of licenses that aren’t being used.
- Reconsider your facilities – While the mere thought of consolidating facilities and renegotiating leases may be exhausting, it’s worth considering. Look at your leases to see if there’s an opportunity to renegotiate within your existing facilities. Also consider your space utilization and whether opportunities may exist to better utilize the space that you currently have.
- Think creatively about your resources – Consider the utilization of your team members. Are there opportunities to move resources within roles and organizations to improve performance in key areas? If your financial constraint is cyclical (and you think conditions will improve in 6-12 months) consider offering a sabbatical program. This allows a temporary reduction in cost, but without the long term loss of intellectual capital that would result from a permanent headcount reduction.
If you try the above and still end up in a position where you need to cut heads, think carefully about the positions and people that you eliminate. While you can quickly make big financial gains by cutting highly paid resources, there is likely a reason they are so highly paid, and you may end up losing key intellectual capital. Be thoughtful about where you reduce resources and ensure you don’t lose the people and talent that deliver direct benefits to your end customers.