Paring Down to Spend More

Economy of flow is a management paradox whose time has come

Mon, 07/19/2010 - 07:43

Often when I write articles or have a speaking engagement, I like to polarize things into black and white. Almost every time I do this, I’m challenged about the audacity of the approach. Nothing seems to irritate people more than the statement “A focus on costs always increases them.” Just to stir the pot once again, I’m making that the subject of this offering.

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One typical response I get is from those who claim “never” or “always” are absolutes, and should be vanquished from our communications. To these folks I say, “Can’t we always improve?” For the rest, let’s walk through this theory together and discern for ourselves what makes sense.

Let’s begin by challenging existing assumptions linked to economies of scale, which is the bedrock for assumptions about reducing costs. Then we’ll explore and debunk two popular strategies that attempt to exploit this assumption around reducing costs: outsourcing and shared services.

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Comments

Submitted by johnkarr on Mon, 07/19/2010 - 12:32

Well said. Too many times, people embrace lean as a method of management by objectives...short term, bottom line thinking. MBO was discredited years ago, but seems as addictive as nicotine. Deming referred to a lot of costs as essentially unknown and unknowable...let quality reduce your costs in ways you didn't consider or measure! Ohno understood this as profound knowledge and instituted leadership to improve quality. Now some people want to short-circuit the work of quality by promoting quick fixes and "Deming light" (much like a 12 step recovery program for Type A's that was reduced to 7 steps to make it quicker). It is time to return to understanding and developing profound knowledge.

I got halfway through - to the point where you discussed call center failures - when my brain blew up, so please excuse my outrage: I'll never be an executive because I wouldn't dream of creating such a cancerous scenario. When my wife was a domestic call center manager, she did somersaults to meet her metrics. What I suggested, and she grudgingly acknowledged but said the company was not yet enlightened enough to do, was that the executives should be asking why do we need a call center?

I'll finish the article now, but I think you've written an outstanding piece.

OK, finished now. I hope EoF's time has truly come - 60-odd years is long enough for industry leaders to get with the program.

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