3 ms·

Its really weird. I feel like the business school experience for most people was like "look at a balance sheet, find costs to cut". The program I did, at a no

Its really weird. I feel like the business school experience for most people was like "look at a balance sheet, find costs to cut". The program I did, at a not very prestigious school (my employer paid) the focus was much more on the long term impact and trade offs of the decisions you make. So you think "Ok, we will save 10k, but what will we lose?" When the answer is "we will lose the happiness of our team" this becomes an obvious bad idea. As an employer this is such an easy way to make your employees happy and reward them for working super hard for you. Once you lose sight of that and look at it as a cost to cut you might as well just not run a business because you're missing the bigger picture.

witek 13y ago
There are various aspects to that. For example, I recently took over a project, where the hardware part needs to be cost optimised. Basically, when the product was put together, two elements pushed the cost higher than I'd like: 1) Both software and hardware teams like using the best components possible, without necessarily putting enough thought into the target market, which the product is serving. I'm not saying that the product should be as cheap as possible, compromising on quality, but there needs to be a ceiling, depending on the market requirements. 2) Not enough thought was put into the most efficient structuring of the supply chain, resulting in unnecessarily high shipment and tax expenses. So, the first exercise was very much similar to what you're describing - go through the bill of materials and one by one try to identify any cost savings. This is causing some loss of happiness (treading on people's toes, having to push for different solutions, in their eyes compromising on quality) but is necessary in making a better product.
hkarthik 13y ago
I don't think this is the b-school experience, more likely it's a result of management consulting experience. Consultants often get into this mindset that they need to find a way to show their value in the most immediate way to their clients, in order to justify their high fees. Basically showing how quickly they "pay for themselves". Coming in as a brand new CFO, you have to prove yourself quickly and justify the high salary you just took. The easiest way is to do that, is to find cost savings within the company and implement them expediently.
- jtbigwoo 13y ago
  >> Coming in as a brand new CFO, you have to prove yourself quickly and justify the high salary you just took. The easiest way is to do that, is to find cost savings within the company and implement them expediently. Right. I bet the CFO in the story had a two- to five-year time horizon for this job before he/she was planning to move out and up. As such, the CFO needed to make an impact in the first year or two in order to get noticed by bigger players in years two through five.
roc 13y ago
Trick is, much of the business world is measured by (and thus optimized for) quantifiable short-term impact. The short term positive impact of cutting out snacks is immediate and obvious. The costs are less obvious and longer term. Do enough long-term planning in a place like that and people start getting tired of long-term answers to short-term numbers not moving. Further complicating this stuff: say a 'good' CFO saw the value in a snack budget and implemented one where it didn't exist before. How do you even measure the impact of the improved work that goes along with improved morale? How do you credit a manager for nixing a 'cut the snack budget' suggestion? How do you measure the negatives that were never incurred? It's very easy to see 'cut snacks, saved 10k; 3 engineers got the wake-up call, grumbled about 'stuff like this' and left, 4 projects now behind". It's pretty tricky to ever say "this project is now on track because we added a food budget and put in a foosball table". [1] [1] Which is why those items tend to be focused on as recruitment expenses. It's simply easier to measure/justify in that context. Which is also why they tend to go away when the company reaches that size where further staffing is composed primarily of employees coming from jobs that also do not have snacks and games, so their necessity for recruitment is basically gone.
- marshray 13y ago
  Agree. Unless you're the only tech shop in town, I think the complimentary sodas in the kitchen going away is primarily a sign of a decision to not be competitive in the recruitment process.

witek 13y ago

There are various aspects to that. For example, I recently took over a project, where the hardware part needs to be cost optimised. Basically, when the product was put together, two elements pushed the cost higher than I'd like: 1) Both software and hardware teams like using the best components possible, without necessarily putting enough thought into the target market, which the product is serving. I'm not saying that the product should be as cheap as possible, compromising on quality, but there needs to be a ceiling, depending on the market requirements. 2) Not enough thought was put into the most efficient structuring of the supply chain, resulting in unnecessarily high shipment and tax expenses. So, the first exercise was very much similar to what you're describing - go through the bill of materials and one by one try to identify any cost savings. This is causing some loss of happiness (treading on people's toes, having to push for different solutions, in their eyes compromising on quality) but is necessary in making a better product.

hkarthik 13y ago

I don't think this is the b-school experience, more likely it's a result of management consulting experience. Consultants often get into this mindset that they need to find a way to show their value in the most immediate way to their clients, in order to justify their high fees. Basically showing how quickly they "pay for themselves". Coming in as a brand new CFO, you have to prove yourself quickly and justify the high salary you just took. The easiest way is to do that, is to find cost savings within the company and implement them expediently.

jtbigwoo 13y ago
>> Coming in as a brand new CFO, you have to prove yourself quickly and justify the high salary you just took. The easiest way is to do that, is to find cost savings within the company and implement them expediently. Right. I bet the CFO in the story had a two- to five-year time horizon for this job before he/she was planning to move out and up. As such, the CFO needed to make an impact in the first year or two in order to get noticed by bigger players in years two through five.

roc 13y ago

Trick is, much of the business world is measured by (and thus optimized for) quantifiable short-term impact. The short term positive impact of cutting out snacks is immediate and obvious. The costs are less obvious and longer term. Do enough long-term planning in a place like that and people start getting tired of long-term answers to short-term numbers not moving. Further complicating this stuff: say a 'good' CFO saw the value in a snack budget and implemented one where it didn't exist before. How do you even measure the impact of the improved work that goes along with improved morale? How do you credit a manager for nixing a 'cut the snack budget' suggestion? How do you measure the negatives that were never incurred? It's very easy to see 'cut snacks, saved 10k; 3 engineers got the wake-up call, grumbled about 'stuff like this' and left, 4 projects now behind". It's pretty tricky to ever say "this project is now on track because we added a food budget and put in a foosball table". [1] [1] Which is why those items tend to be focused on as recruitment expenses. It's simply easier to measure/justify in that context. Which is also why they tend to go away when the company reaches that size where further staffing is composed primarily of employees coming from jobs that also do not have snacks and games, so their necessity for recruitment is basically gone.

marshray 13y ago
Agree. Unless you're the only tech shop in town, I think the complimentary sodas in the kitchen going away is primarily a sign of a decision to not be competitive in the recruitment process.