I believe I’ve talked about this many times before in the previous posts. Here I am again, talking about this to stress the importance of it (after finishing a chapter of the book “Built to Last” on the same topic).

Time and time again, we’ve heard about companies aiming to cut cost and to be more efficient, or to increase the “numbers” (which means sales, in case you’re wondering). These companies will go to great extent in order to cut a little bit from the overall cost of running the business. Why? Well, it does make sense doesn’t it? The lower the cost of running a business, the more profitable it is! Well, at least that’s true for short term or for a narrow-minded person.

The point here is to think of long term….look towards the future. What will your company be like 5 or 10 years later? If it’s going to be big and successful, have you actually lay out the foundation or plans for your company to move towards that direction? Yes, you can cut all the cost you want, but is that really helping? Of course it would, if your company plans to stay for another few years in the industry before it got left out by the competitors.

The authors in the book “Built to Last” mentioned that some companies actually “milked” their future away to solve a short term problem. They cut cost (which means firing good employees/using materials with poor quality/selling the current state-of-the-art equipments in favor of cheaper and less efficient equipments/etc.) to solve a current problem…to get a short term solution. However, in most cases, it will only backfire after a few years.

On the contrary, some companies actually continue to spend on things such as R&D, employee training program, hiring good people, etc even though the companies are faced with some financial problems. Why? Because these companies aim for the long shot towards their “goal” (unreachable goal….I’ll talk about this sometime later).

Please don’t get me wrong. Cutting cost is not necessarily a bad thing to do. But it is something that everyone should plan properly before acting on it. If you are able to cut cost and at the same time, not neglecting the quality or the things you used to do (which made your company successful)…..then by all means, go ahead! You can always use the extra $$ saved from the cost cutting plan for other things.

So do think properly before your company start engaging any cost cutting program. Look towards the long term health of the company….not the short term gain. What’s the use of saving a few cents now when your company might face the possibility of losing a few million dollars worth of opportunities few years later?

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