As a Black Belt, I know it is easy to fall into the trap of working only on projects that cut costs. I also know that this type of “accounting” is a slippery slope that can cloud essential business goals by creating unfounded visions of savings.
Don’t get me wrong – cutting expenses is important. For a manager, having to explain, even with 50 well-prepared PowerPoint slides, why the group is over budget, is as painful as a root canal. Cost cutting, however, doesn’t always equate to long-term profitability.
During a period of declining profits, it is common for companies to begin cost-cutting efforts to trim the fat. Spending caps are imposed and projected budget expenditures are reduced. Eventually, companies turn to process improvement efforts such as Six Sigma or Lean to dig deep into processes to reduce waste. It is at this point that faulty project selection and chartering can create a mismatch between estimated savings and actual positive impact on the bottom line.
To keep from heading down this path, Black Belts should ask themselves: “Who am I accountable to?” An unrealistic departmental budget? A manager who wants to shake up the department? A company that has hired a large contingency of Black Belts to cut costs and efficiencies?
It’s understandable for a Black Belt to be confused by who the “customer” is, especially since they are working with both internal and external customers. Too often, a Black Belt services the internal customer – the person who hired the Belt or the person the Belt works for. These internal customers may be most concerned about their particular areas. The result: The activities of a Black Belt can be siloed into departmental goals that may or may not coincide with the overall goals and vision of the company.
Projects selected by the Black Belt should directly impact the external customer. It does not matter how much money projects save an organization – if the savings do not positively impact the customer, then they are worthless.
Getting buy-in to the idea that cutting costs is not the primary project benefit can be trying, though. One approach is for Black Belts to make sure they are setting realistic expectations for project benefits. No postulating. No grandstanding. Just show how the customer is being positively impacted.
Consider a project that resulted in a new process to recycle cardboard boxes. The process reduces both the amount of waste generated and the number of times the trash has to be dumped, saving $50,000 annually. Though the project did save money and made the company greener, did it really impact the customer? What if the company’s president were to ask the Black Belt what impact this project truly had on customers? How would they answer? Here are two possible, but lame, answers:
1. “With a new green image of the company, our customers will feel that we are good stewards of the environment. Their loyalty to us will increase, which will cause sales – and profits – to increase.”
Of course, the company may need to spend $85,000 on a marketing campaign to let customers know it is greener. Interpretation: no positive impact.
2. “We will be able to use that $50,000 and reinvest it in new technology to provide better products to our customers.”
Most “savings” on projects are projections for the following 12 months. This means the company should have an extra $4,166.67 each month – a small amount to invest in new technology. Interpretation: no immediate positive impact.
The bottom line: Black Belts should be accountable in the accounting of their projects. They should select those projects that positively impact external customers, and should look beyond just cutting costs when determining project benefits. Maintaining and increasing the customer base by providing quality goods and services in a timely and efficient manner will help ensure the profitability of the company. Ultimately, this also will ensure the success of the Black Belt.