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Mike Rother

Rob Austin: how do we assuage fear of cost-cutting in times of crisis?

By Mike Rother, - Last updated: Sunday, December 6, 2009 - Save & Share - One comment

As exciting as the lean ideas are, there’s a concern a person might have that starts with the name: Lean.  As in “lean and mean” or as in “cut your staff by half to make your operations leaner.” How do you keep lean initiatives from being bushwhacked by the cost cutting crowd, especially in today’s down economy? This is not an abstract worry. I’ve seen some so-called “lean” initiatives that looked suspiciously like cost cutting to get an organization ready for sale or spin off. How do you keep a program
called “lean” from being (or perhaps becoming, step by step, as managers feel pressure) an apparently principled smoke screen to mask ruthless cost cutting? Partly this seems like an issue of priorities: Which take precedence, lasting improvements, or short term cost cutting? Managers might feel pressure to do both. And even when lean isn’t a smoke screen, people might suspect that it is, which amounts to an implementation problem. How do you get people who you need to cooperate in a lean initiative to put aside their suspicions and fears and embrace the overall philosophy?

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One comment to “Rob Austin: how do we assuage fear of cost-cutting in times of crisis?”

Comment from Mark Rosenthal
Time December 19, 2009 at 9:09 pm

I think the key is to be clear on the purpose, both to yourself, and to the people.

Which takes precedence?
First, survival, because without that there is no future. Yes, there may be past mistakes that led to this point, but right now that is irrelevant. The enterprise must be either minimally operating at break even, or in a real (and psychological) position to absorb the losses.

If either of those conditions is met, then the thinking can also look a little bit into the future.

Assuming some degree of optimism about eventual recovery in sales, “How can we best position ourselves for increased sales without increased costs?” is a great question to ask.

Consider the possibility of being able to handle a significant increase in sales with NO increase over today’s levels of fixed, labor and capital? If you are breaking even today, then 100% of the value-add from new sales goes straight to the bottom line.

The key benefit from lean production is that it delivers ever increasing levels of capability and capacity for the same amount of resources. To benefit from that, it is necessary to put that capacity and capability to work to create more value.

So – if there was an effort today, following Nakao-sensei’s mantra of “no more people; no more space; no more money” the enterprise gains reserve capacity (at no additional cost) that can be applied IMMEDIATELY to meet new demand.

Honestly, though, it requires enlightened and disciplined leadership to pull this off. And I think that is where your question “How do you keep [this] from being bushwacked by the cost cutting crowd?”

I guess the answer is “Good organizational alignment on a goal coming from the top.”

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