It's a Project Manager's World Newsletter with Dr. James Brown
      January 2009 Full Moon Edition      

Cost Cutting is Not Cost Savings - How Good is Your Leadership?

I attended an event at Disney this month. Although I am not a fan of theme parks, I love to visit Disney so I can participate in and watch their service. It is always excellent. The place is always clean. The employees are always well mannered and ready to serve. This is exceptional for an organization their size, scope and with the amount of human interaction that takes place daily.

I want you to close your eyes for a second and think of the leaders one or two levels above you… In fact write their name down on a piece of paper to aid in the visualization. Now answer the question below.

If your leadership worked for Disney, would Disney be in better or worse condition?

Some of the leaders I worked for would definitely put Disney in a worse condition. First they would say "we are spending too much money keeping this place clean" and cut the cleaning staff. Then they would say "the employees don't need that much training" and cut training past the bone to the marrow. Next they would say "all this landscaping is unnecessary and we could save huge amounts of money on water and fertilizer if we took the flowers out." They would then make the place flowerless. They would then pat themselves on the back for saving water and protecting the environment by eliminating the landscaping and apply for some kind of award.

Cutting More Costs Often Means Saving Less Money

As a result of the actions above there would be significant short term cost reductions. As a result of these same actions revenue would also decrease because customer satisfaction would also decrease. Their response to the lower revenue numbers resulting from fewer customers would not include looking at increasing service, their response would be calling a meeting to identify what else could be cut because revenues are declining. I know this message may not be timely in this economy but…

Cutting Cost at the Expense of Cutting Service is not a Long Term Solution

It is in fact a risky short term solution since customers have long memories of poor service. A lot of organizations like to blame the economy for their ills when the economy may be 20 percent of the problem and poor leadership over a period of years is 80 percent of the problem. Poor leadership is 80 percent of the problem in a lot of cases because they are over focused on cost and under focused on putting their employees in a position that allows them to be successful and maximizes the service level to their customers.

The Cost Cutting Principle also applies at the Project Level

In order to save money or shorten schedules, some leaders often pressure project managers to shorten the requirements process, trim the testing, or delay the documentation, etc. etc. Six months to a year later these same leaders then question why this or that happened or why the project manager doesn't have more control of the projectNothing comes for free, everything has a price and the price will be paid at some point. Free is not an option.

Dr. James T. Brown PMP PE CSP


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