BUSINESSES will need to manage the process of cost reduction well to ensure that they do not unwittingly compromise their product quality or service standards.
Cost-cutting is a short-term strategy. It is far more important that companies take a long-term view to build and strengthen their organisation and its capabilities now, positioning themselves for the eventual economic recovery.
Over the years, businesses have worked hard to win customers to get to where they are today. To lose their customers now would be tragic. Studies have shown that it costs up to six times more money to acquire a new customer than to retain an existing one. In the slow economy, it would probably cost even more to win a new account.
Businesses must have an unrelenting focus on delivering the best customer experience. There must be the line of sight from the top to the bottom of the organisation. Take care of that and you will enjoy customer loyalty — and revenues and profitability will follow.
Many companies find that 20 per cent of their customers provide over 80 per cent of their revenue. Thus, high levels of repeat customers will lead to high levels of profit.
To achieve that, companies must remain constantly vigilant about the changing requirements of their customers, understand their business models and the markets they operate in, know what their customers want and deliver these to help their customers succeed.
To achieve business excellence, everyone in the organisation needs to focus on delivering customer satisfaction by taking personal responsibility for improving processes and be empowered to make changes.
Departments need to become self-managed teams; cross-functional teams are needed at the company level; and the organisation needs to be flatter and more efficient for faster decision-making and response. When the company finds a problem or an opportunity for improvement outside, they need to collaborate to find the solution.
For that to happen and for that change to be successful and sustainable, a holistically integrated approach to business excellence, which engages all parts and elements of the organisation and its leadership, is required.
Leadership for change
Executives must lead the change process, from thinking about productivity and quality to learning to create a company that consistently delivers high value and customer satisfaction.
They must establish a culture of continuous improvement that seeks to remove bottlenecks, eliminate sources of waste and customer dissatisfaction, and become more efficient and more effective.
There must be a focus on reducing cycle time, rapidly transferring knowledge and delighting the customer — these help the company to maintain its competitive edge.
Management must also be able to spot changing customer preferences, be aware of the changing competitive landscape, harness advances in technology, seize opportunities and implement new solutions rapidly.
Product and service standards have to stretch from the top to the bottom of the organisation and need to cut across all departmental lines. The organisation’s own learning and development process must be structured, systematic and focused on building on its strengths. Critical systems that support hiring, training, recognition, career advancement and information access need to be in place.
Organisations can reorganise, downsize and streamline their way to efficiency. These approaches are necessary but often not sufficient to catapult organisations into high-performance mode because they neglect one essential component of performance — engaging employees in their work.
To mobilise the entire organisation, leaders must ask for employees’ inputs and their involvement, especially in areas that need improvement. Employees must be trained and equipped to go from “good to great”.
Total approach needed
For companies to be successful in their business, they need to be responsive to their customers’ needs at every step of the business process involving every function, employee and leader. Anything short of a total approach is unlikely to deliver the desired outcomes.
Organisational transformation is a long-term process requiring a fundamental change in management practices and culture — a paradigm shift.
Finally, the organisational direction that advocates the strategic intent has to be clear about the objectives that needs to be achieved, the type of values and capabilities that are needed and how all this is going to be implemented for successful change to occur.