Employee Savings: How You Can Reduce Costs and Improve Morale
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Employee Savings: How You Can Reduce Costs and Improve Morale

Nearly every business owner has, at one time or another, found themselves on the defensive, scrambling and looking for ways to cut costs and pump up the bottom line. But too often this scenario involves terminating employees. That's a move which does reduce payroll but can also have a devastating impact on morale and customer service. In other words, it's a short-term solution to a long-term problem.

Customer service guru John Tschohl, founder and president of the Service Quality Institute in Minneapolis, Minnesota, says it doesn't have to be this way. He says what these executives should be doing is looking for ways to reduce day-to-day costs without sacrificing quality or service. "Often, when they decide to do so, they hire high-priced consultants to come in, look over their operations, interview employees, and then develop a glossy report of their findings," he says. "It's an expensive and lengthy process. And most often it focuses on looking for ideas that will save $100,000 to $1 million in one shot."

Tschol says business owners are correct in turning to experts to identify areas in which they can cut costs - but they're turning to the wrong experts. They should be asking their employees. Those employees already are on site. They already are knowledgeable about people, processes, products, and services. They know what changes could be made to improve productivity and cut costs. They're just waiting to be asked for their ideas, and he says you should just ask them.

He gives the example of the Mullican Flooring Company. The organization developed a BAD (Buck a Day) Cost Reduction Campaign, which asked each employee to identify a way to save $1 a day. "During the first few days of the BAD campaign at Mullican Flooring, 13 employees suggested that the company reduce the number of ear plug sets it gives out to employees to one a day," says Tschol. "The resulting savings was $12,000 a year. The campaign's overall participation rate was 78 percent."

Idea campaigns, like the one employed by the Mullican Flooring Company, stress the fact that every employee can help to reduce expenses and to improve productivity. Tschol says you can help to ensure the success of an idea campaign by taking the following steps:

  • Limit it to no more than 30 days. If it's longer than that, it will lose momentum and become boring. And, when it becomes boring, it becomes ineffective. 
  • Focus on low-hanging fruit. If you ask for ideas that can save $1 a day, employees can relate to that. If you ask for ideas that will save $10,000 or more, they'll be intimated.  
  • Include humor. The campaign has to be fun. When it is, employees will become involved and enthusiastic.
  • Implement ideas quickly. If you don't implement ideas in a timely manner, employees will become disheartened and will be less likely to make suggestions the next time you ask for them.
  • Recognize employees. When you recognize employees who have contributed valuable ideas, it spurs others to do likewise. Don't use money as recognition; it won't last. Instead, celebrate employees and their suggestions with public praise. Make them look like heroes.

When you ask your employees for their ideas on how to cut costs and improve productivity, you make them feel as though they are important members of the team. And you will realize savings that will give you an edge on your competition now and in the future.

Published: May 24th, 2011

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