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Bijdrage aan Tired of all these Cost Savings Initiatives that keep Hitting Us While Underlying Causes remain Unsolved?

4C-modelAt my very first job after university (and the military draft) I noticed that most people try to steer on conditioning the system variables and not on the observables of a system. An observable is what we can observe of a system, regardless of our model in use. Everybody can see the trees of a forest, so the trees are observable. The eco-system of a forest, is a different matter. These are the system variables, the things we can measure – for instance, the number of trees or different kinds of trees. The system variables are to be translated into observables and vice versa. However, the number of trees in the forest itself is NOT an observable: the number (amount) of trees is not a tree. Count first, then you have a number. And when you’re finished, some trees will have grown up and some will be chopped down. You cannot see the forest through the trees by reducing their number. In the same way: you cannot reduce expenses (out of pocket money) by reducing costs.

System variable: an opinion about costs
As I’ve been telling for about 30 years now: costs are not observables of a system, but system variables. Costs is a system of attributing expenses (= real money) to … whatever you choose: activities, locations, people,… . The only rule is: you are not allowed to change a current system of attributing expenses (because you can then cheat on the profits and taxes). Costs are numbers about the system and always incorporate (use of incorporation intentionally) a view or opinion on the system about the perceiver. There are no value free numbers. Cost are very handy when you use them as intended: to compare your budget (un budget est un monsieur) with the actual expenses. Then you can see where your predictions of estimates differed: in volume, in efficiency, … (by the way, my latest budget for producing a book was correct within three significant numbers).

So costs are NOT expenses; however buying a costing system is AND cost cutting also incurs expenses – in money and other wise. It is at the expense of the commitment of your employees, the trust in your system and the output to your clients.

Observable: expenses (out of pocket money)
What are observables related to costs? That is were you spend you’re money on: people, (building) space, machines, equipment, electricity, … . When you want to cut expenses, look at the task assignments. Just ask the people executing tasks how they can reduce expenses. The first thing they’ll say is: let management stop bugging us about cost reductions!

I’ve worked – in the 90’s – for a very large company as a manager production. We (it is always a team effort) reduced space by 50% (m2 cost went up 200%) , cut inventory by over 80% (was made into a “profit” for sales and marketing by redistributing costs), made everybody cross trained (so they could take over each others jobs), had zero defects, 100% delivery reliability (without any inventory, it was simply not believed) and could innovate faster then the market could absorb (which is very easy, when you get rid of al the red tape) . And then the accounting system said: we cannot account for your costs any more, so the management decided to close you down the factory, as it was not cost effective. The way I managed to reduce expenses was just to focus on the task: where can we reduce expenses.

Issue: co-operating
We tend to focus on costs, because then we do not have to look at the underlying issue of co-operating. When everybody uses his or her talents at their best, the expenses are lowest. So, this is the main issue of leadership, everybody should be assigned to tasks which meet their competencies. At the same time, people co-operate best when they’re working in an affective working group (Bion) or team, contributing on tasks they excel in.

There are two complications, however:
1. how do you know the tasks fit you (in any team more complicated then a football team)? The issue of learning.
And 2. Peter’s principle.

Investing in people
Ad. 1 The first implies that we have to make expenses – let’s call it investment – into learning, training people. The problem is, all expenses within a company or organisation are – on the short term – more or less fixed. EXCEPT for travelling and training! So the first thing we cut, is training (as this also reduces travelling expenses). By redefining “training” and “education” as a personal investment and not a company or societal investment, we reduce costs at the expense of organisational competence. Where are the factory schools? Gone. And then manager start to complain that education doesn’t fit the companies. In the 19th century factory owners invested into schools, libraries, even houses of their employees. Now it is all “out sourced”. (I used to resent calling the Personal Department “Human Resources”, as I do not consider myself to be a resource and never will).

Competent incomptence
The 2nd one is Peter’s Principle: “people tend to rise to their level of incompetence”. It goes like this: a good first grade teacher, will become head of a school. When she still treats parents as children, she’ll be at her level of incompetence. If not, she might become part of a governing body. When she treats politician as parents: she has hit her level of incompetence. etc..

I’ve seen a very good planner being promoted to Logistical Manager. Because he was better than his people, he did their work too, his planners becoming demotivated and proving what we already knew: incompetent. Why was he made Manager? Because only then he could be paid more, according to his level of competence as a planner. A good planner, I always say, is worth his weight in gold.

This is not a law: there are competent people in every organisation (and, when I worked as a consultant, it was my task to find them). Not everybody has yet reached their level of incompetence. And here is the key issue: incompetent people are promoted to the position they do the least harm to the customer: the management (Dilbert’s Principle). Here there is also the cover up of the cover up (Argyris): off course being in a management position proves you’re not incompetent (duuhhh) and makes it impossible to discuss this (q.e.d.). (I did. I’m not against incompetent managers; there is no point being against it, it is a principle; like after rain comes sunshine – or more rain. I only think we should be able to talk about this issue. I was fired, problem solved.).

The issue of cooperating is fundamentally unsolvable: there is no permanent solution of who is assigned to do what and – connected to this – what is a fair distribution of profits or earnings? The Complex – as I experience complex in the Jungian way – is that there is

All problems are symptoms of solutions. When we have an insight and apply a solution, we inadvertently also introduce new problems. Because – in my opinion – a problem is also an opinion about a situation. I’m not saying we shouldn’t solve problems, i’m saying that solving problems can introduce (new) problems, some times called issues. Solving problems is inherently paradoxical as it assumes there is a problem to solve. We cannot solve the problem of solving problems, because not solving problems will also not solve a problem. The only thing we can reasonably achieve is making people stronger in solving their own problems with each other and/or make problems lighter to bear.

MöbiusAnd I do have the notion that any system has an “EigenZeitt”, a speed at which it can evolve, change, accommodate, adapt (and die). This – in my experience – is not resistance to change, it is just how a system moves, System behaves (i like that word: it combines to be with to have). It will take about nine months for a woman to bear a child. A new Gestalt will takes ages. The interesting thing is, that somehow complex is managing to become self-aware and speed-up its own evolution.

Over Jan Lelie

Loves to facilitate groups in complex situations
Dit bericht is geplaatst in 4C-model, English, H7 Veranderpaden, Systems Thinking, zorgkosten met de tags , , , , , , . Bookmark de permalink.

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