How would you like to get hundreds of actionable cost cutting ideas directly from your employees?
Many organizations are successfully cutting their costs without compromising quality. You can too, and it’s not as hard as you might think. All it takes is to properly tap into the collective wisdom and creativity of your people. Elegant, creative and widely supported ideas will soon be bubbling up from the front lines.
Most organizations agree that layoffs are the last resort. Fear quickly permeates the company (am I next??) and the ones left standing often suffer “survivor guilt” and resentment that leaves them inefficient and even counterproductive.
So why do these same organizations resort to layoffs while leaving countless other cost-cutting opportunities lying on the table?
It’s because from the perspective of the high-level spreadsheet, that’s the most obvious place to cut costs. It just seems too time-consuming to search for all the small ways that costs can be cut. However, your employees likely have hundreds of easily achievable cost cutting ideas already in their minds and many more that they can create during a facilitated brainstorming session. The trick is to efficiently collect this information and make it actionable. Fortunately, there is a simple, structured process to make this happen. But first…
The Three Essential Ingredients
You must be willing to provide these three essential ingredients:
Transparency: employees must know what their departmental budget is and how it’s being spent. This alone often reveals significant opportunities as employees see obvious inefficiencies that management may have overlooked. Employees must also know and understand the process by which their input is going to be taken forward.- Willingness to listen and take action: few things are worse for morale than being told your input is valuable and then realizing it was not taken seriously. Employees must be able to see how their ideas are progressing through the chain and finally being implemented.
- A Structured approach: it is critical that the idea generation process is targeted and specific. The challenge that you give your employees must be easily understood and focused. It is much better to ask “how can each department reduce its costs by 10%” than “how can we become better at what we do.” Once the challenge has been laid down, the process for gathering input must be engaging, efficient, creative and trackable.
Combined, these three ingredients give you the foundation of the Innovation Process Management (IPM) approach. This is a simple, structured process that distills the limitless creativity of your people into powerful, actionable ideas.
There are seven steps to IPM:
- Define the Problem. It is critical create a focused and well-defined problem statement. Eg. “Our budget has been cut by 10%. We need to find ways to save money.”
- Lay Down the Challenge. This is the statement that reframes the problem into a challenge that people can work on. Eg. “How do we save 10% in the departmental budget without laying anybody off?”
- Get the Word Out: This is especially important if you wish to gather ideas from across a large organization. For smaller groups, this may not be necessary.
- Gather Ideas: This can take different formats:Online idea gathering through an internal Wiki or via email. This is best when people already have a lot of ideas that they are ready to contribute. This gathers the most obvious ideas and allows for cross-functional discussions as people add to, comment on, support and improve the listed ideas.Facilitated brainstorming sessions. This elicits the most creative and high impact ideas that may be beyond the standard “thinking box”. Essential if you want to get new, groundbreaking ideas that really make a profound difference.
- Evaluate Ideas: You can easily end up with 100′s of ideas. Now it’s time to evaluate them. Using pre-set criteria, you can quickly narrow them down to best ones. Once you’ve got the ones that past the first cut, it is critical to pass them by 3rd party experts to make sure that they are actually practical. These can be internal or external experts.
- Implement: The process has given you the ideas. Now it’s time to implement. During this phase, it is critical to keep the communication lines open so that everyone involved in the process can monitor the implementation and see their ideas making a difference.
Measure:Use a set of indicators and metrics that you’ve defined for each idea to measure its success.
There are software tools specifically designed to help with this process, or you can do it by linking together internal resources.
Of course, in some organizations this will be more difficult than in others. If your people are already cynical because of past unfulfilled promises then you’ll have a bit of work to do to get them on board. So first, carve off a smaller problem and apply the IPM approach. This can easily be accomplished from idea gathering to final implementation in just a few weeks. Once you’ve gathered and evaluated the ideas, implement the best ones and communicate it across the organization. Then go to the next problem. Soon you’ll have the credibility to take on even the largest issues with enthusiastic buy-in.
The IPM approach combines the best of traditional brainstorming techniques with modern internet-based crowdsourcingapproaches and the latest advances in brain science. (For example, did you know that a recent study showed that people produce twice as many creative outputs when working in an environment where blue is the dominant colour? Do you have a “blue sky” room?)..
One of the hallmarks of the IPM approach is the independent expert peer review. Once you’ve gathered and clustered the ideas and decided which ones you’d like to move forward with, it’s time to give them the expert acid test. This ensures that the ideas are actually practical, effective and actionable and not just based upon the manager’s whim or a popularity vote amongst the employees.
Results
So what can you expect? These are the types of ideas that come out of the sessions:
- A company partnered with other companies to create a data center cooperative. Instead of each company running their own data center, they pooled resources into one commonly owned data center. They reduced their costs down to a level that “no vendor could touch”.
- One organization gave everyone a “one side used” recycling tray on their desks. That way, printouts that are no longer needed but have only been printed on one side of the page, can be returned to the auxiliary tray of the printer/photocopier and reused for draft and working copies.
In order to keep their cabs warm, truck drivers were keeping their trucks running during cold weather while at the loading dock. The company provided small electric heaters for each truck and a convenient place to plug them in. Problem solved, fuel cost reduced, carbon footprint minimized.- An employee suggested using bubble wrap instead of a cardboard box for shipping products. This brought the shipping weight to just below the next lower price break, saving the company three dollars per package on priority post costs. A huge savings when hundreds of packages were being shipped per day.
A software company recalled corporate cell phones and created a cell phone pool that employees can borrow a phone from when required for business purposes. The company’s internal phone system already had the ability to forward calls to an external number, so when an employee borrows a “pool phone”, they simply forward their office phone to the cell phone allowing their colleagues to still call them without having to know which cell phone they have. This reduced the cell phone count by 70%.
- A government department that was split across two office buildings was incurring large inefficiencies because of the time it took employees to travel between the two offices for face-to-face meetings. This was also slowly eroding morale and teamwork. One employee suggested web cams be outfitted on every computer. Now most of the face-to-face meetings can be conducted via web cam and free software such as Skype. This had the added benefit of reducing the number of dedicated phone lines they needed to pay for.
- One organization was loath to cut the workweek down to 35 hours in order to save jobs until the employees themselves suggested it. Since it came from the employees, buy-in was automatic.
The list is endless. The point is that there are many ways to save money besides the traumatic cuts that so often come out of high level spreadsheet analysis. And although many of them may well result in only a few thousand dollars in savings, when you add 10, 50, or 100 of them together, they can make the difference between layoffs or not. Or even between survival and bankruptcy.
The less obvious benefit is that as the cost-saving culture takes hold, employees will naturally be looking for cost cutting opportunities. An employee on a business trip who previously would buy an expensive meal at the hotel just because “the company’s paying for it” may instead choose to go to a funky bistro down the street and pay a third as much for a healthier meal. Instant corporate cost savings.
Where currently you may have rigid spending guidelines and all the burdensome control and approval mechanisms in place to monitor them, you can now relax them a bit knowing that your employees are less likely to take advantage of the company. That’s the trust dividend in action.
When you use the Innovation Process Management approach, you wield the most powerful, cost effective and rapid toolfor tapping in to your people’s best ideas and then successfully implementing them.
For more information on managing the innovation process, you can download the course materials for MIT’s Sloan School of Management “Managing the Innovation Process” graduate course.
Or contact us and we’d be happy to speak with you about this powerful approach to innovation.