QUOTATION 5

ANDREW CARNEGIE ON TAKING CARE OF THE PENNIES

Use this to remind you of the need to control costs.

The old saying, ‘Take care of the pennies and the pounds will take care of themselves’, was reformulated by the great Scottish American businessman Andrew Carnegie (1835–1919) for use by managers:

Watch the costs and the profits will take care of themselves.

Andrew Carnegie

Illustration

Perhaps the best example of paying attention to the little things and achieving huge rewards is Masaaki Imai’s approach to quality. His Kaizen model suggests that instead of improving one facet of production by 10 per cent in an effort to improve quality, managers should attempt to improve all aspects by just 1 per cent. The overall improvement will be many times greater than the former approach.

It is the same with expenditure. It’s easier to save £100 on each of 1,000 activities than £100,000 on 1 activity.

WHAT TO DO

  • To develop a Kaizen-inspired approach to expenditure you need to act as an exemplar to all your staff. This means walking the talk. Be consistent in your actions and show your determination to follow this approach, even when others are demanding that you cut expenditure by 15 per cent from the training and advertising budgets immediately. In the long run, such arbitrary cuts damage the organisation’s ability to grow.
  • Start by getting out of your office and seeing what is actually going on in offices and on the shop floor. This is management by walking about and does not require you to undertake a detailed analysis of what’s happening: that can come later, if required. It’s concerned with looking at what people are doing. As an informed, intelligent and critical observer, you’ll see plenty of things that strike you as odd or inefficient; make a note of them.
  • Talk to the staff, don’t interrogate them. Ask them about the problems they face and what they would do to improve processes and practices. Specifically ask them for their ideas on how costs could be reduced. Stress that you’re interested in shaving costs, not cutting jobs or whole processes.
  • Back in your office, list the ideas identified and, in conjunction with the relevant members of staff, identify which are likely to produce actual savings. Don’t be greedy. Look for small, easy-to-implement savings that will have a quick impact and show staff that savings can be made without impacting on staffing levels or salaries.
  • Always recognise good suggestions and seek to reward the person who made it. Don’t take credit for your staff’s ideas. If you do, ideas will dry up. You’ll get the credit for increased profits: that should be enough for you.
  • This approach can’t be a one-off exercise; it is a continuous process which you must commit to indefinitely.
  • Share at least a proportion of the savings with the staff affected.
  • A windfall benefit of this approach is that staff will become more motivated because they will feel that their views are being listened to (see Quotation 45).

QUESTIONS TO ASK

  • Do I have the determination and self-discipline to adopt this approach indefinitely?
  • Where are the pennies that I could save in my work?
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