The content of this article is mainly tailored from "Chen Chunhua: Five Ways to Reduce Enterprise Internal Costs", focusing on why we should pay attention to internal costs? Companies that survived because they exceeded the industry average growth depended on internal cost capabilities. How to reduce internal costs? Five feasible methods are provided. In general, increasing efficiency and reducing costs is an inevitable choice for sustainable development of enterprises.
table of Contents
Why can't there be a minimum cost?
How to make the cost reasonable and competitive?
1. Products and services continue to meet customer expectations
3. Cheap labor cannot bring low costs
4. Simplify, simplify, simplify
5. Put the best talents on the front line closest to the action
Why can't there be a minimum cost?
There are three reasons:
1. Cost determines quality. It is cost that has a direct impact on quality. I don't think there are high quality at very low cost.
2. Cost determines attractiveness . If companies are willing to invest costs, they will find more and better people will come.
3. Cost reflects the determination of the enterprise . The intensity of the input cost depends on the determination of the enterprise.
What is a reasonable cost?
There are three standards:
1. Let everyone perceive the investment of the enterprise.
2. The cost of comparison is basically reasonable.
3. The cost based on quality is also reasonable.
How to make the cost reasonable and competitive?
1. Products and services continue to meet customer expectations
1. Starting from the needs of customers
Having the same way of thinking as customers , whether it is product design, technological innovation, sales promotion or service, we must start from the needs of customers, not from the company’s products itself. We should choose lean manufacturing like Toyota to save customers’ Every penny" makes an effort .
2. Manage customer expectations
Customer expectations are a management process, a communication process, and a consensus process. Many times Chinese companies make a mistake, which is to raise customer expectations too high and fail to manage customer expectations. Competitive reasonable cost is constantly managing customer expectations .
2. Eliminate all waste
In addition to communication costs, time costs, and trust costs, there are six common wastes that are most wasted in a company.
1. Decision cost
The boss is very afraid that he is wrong, the decision is too slow, and it is very wasteful not to make a decision when it is time to make a decision.
2. Process cost
Originally, two people could solve the problem immediately after half an hour of communication, but they chose to use the process to solve it. A process would have to go through at least three people and it would take three or four days.
When I asked these managers why they didn’t solve it right away, they said it was a process requirement. I called this process cost. In fact, this cost is very high, but everyone is accustomed to it and thinks this is the right approach. As a result, the processes in the enterprise are numerous and complicated.
3. Conference cost
Many senior managers have to meet to prove that they are busy. Meetings will stop everyone from what they are doing. This is a huge waste.
4. Opportunity cost
Those parts that we call opportunities are actually wasted. Many people say that my life is not good. Why do catering and not the Internet? Internet people also say that the Internet is too substitute, why not sell a bowl of noodles? Therefore, it should be selected and executed instead of making other judgments.
5. Sunk costs
This habit is similar to a girl’s wardrobe, as long as conditions permit, girls will like to buy new clothes, but a strange phenomenon is that girls who bought new clothes still like to wear the clothes that they often wear in most cases. , The clothes I bought are hung in the closet, and I still feel that there is no suitable clothes to wear, and then I keep buying new clothes and put them in the closet. These clothes hanging in the closet are "sunk costs." The sunk costs in the enterprise are also great.
6. System cost
The process will affect everyone, so streamline the process.
3. Cheap labor cannot bring low costs
High-efficiency employees can make costs more efficient, but high-efficiency employees require you to give him high value, at least with high salaries, high posts, high rewards, and high opportunities. What is the biggest characteristic of high-performance employees? How did you find that he is a high-performance employee?
1. The first characteristic of high-performance employees: Motivate yourself
He does not need company incentives. If an employee talks to you about salary from the beginning, this is a non-efficient employee.
2. The second characteristic of high-efficiency employees: Solving difficulties by yourself
He solves the difficulties himself, and when you encounter such an employee, you must not let him go, he will help you save costs. All costs spent on employees are called meaningful value sacrifices.
4. Simplify, simplify, simplify
The management of the enterprise is too complicated-the organization level is complicated, the salary system is complicated, the assessment is complicated, the division of labor is complicated, and even the corporate culture is very complicated. In such a complex management state with unclear rights and responsibilities, how can we improve efficiency to face changes?
Mr. Drucker said: Management is two things, reducing costs and improving efficiency. Management does not need to be vigorous as many managers do.
Cooperation and information exchange between enterprises can obtain the most important ability: rapid market response. A successful quick response means that the company accurately grasps the value required by customers through cooperation with the community of interests, and meets the needs of the market and customers at a low cost and high speed.
5. Put the best talents on the front line closest to the action
' People' is the most fundamental starting point for all operations. " Relying on employees and relying on excellent talents, companies can fundamentally solve all the challenges they face.
If you can’t focus on using and developing the creativity and potential of employees, the company’s most effective creative assets will be wasted, and it is the frontline employees who have the most contact with customers and the most direct value creation. The company only needs to use the creativity of the frontline employees. Connecting with potential and all customers will have a clear competitive advantage. Companies need to understand that only with excellent people in the front line can companies gain the most direct and fastest advantage.
Companies must truly understand what skills front-line employees have mastered , because these employees directly face customers, and their abilities and levels determine the quality of corporate services. These employees also directly determine whether the company's input and output are maximized, and more directly Determine the effectiveness of the company's cost and the most direct competitiveness.
Because, in my cognition, front-line employees determine the company's cost, quality and sales volume. So on the one hand, I insist on the need for excellent people on the front line, and on the other hand, I believe that front-line employees cannot be easily adjusted. Some companies put the last elimination on the front-line employees, which is a cognitive error. The last elimination should be among the managers and the second-line.
It is for this reason that I ask managers to pay attention to the construction of the front-line team and the construction of the ability and level of the front-line employees. The best people must be put on the front line. Managers must understand what skills the employees have mastered and whether these skills are properly used. At the same time, they must also ensure that the most capable and level employees stay on the front line, so that the enthusiasm and creativity of the employees can be fully utilized to obtain the services praised by customers. Quality, so as to get the opportunity to be with customers. In this way, excellent people are creating value, and its cost will definitely be low.