Cost-Cutting!

Cost-cutting is good, but not at the cost of your organization.

People are assets, though not reflected in your balance sheet. It is people who give life to the other factors of production that are lifeless.

When you dispose off a physical asset you get revenue while you have to shell out money when you dispose-off human assets. Indiscriminate reduction of staff in the name of VRS and CRS will have telling impact on the organization.

Though downsizing the workforce will show an immediate improvement in earnings, in the long run it may result in a great loss to the organization. Never orverlook the time, money and effort spent by your organization on you staff in training them to suit the requirement of your organization.

There is a difference between cost and investment. Amount spent on human capital is an investment and not a cost. If you are downsizing your workforce in the name of cost cutting, bear in mind that you are really doing away with your investment. Hence, think twice before acting on it.

I strongly recommend the Cost-Control in place of Cost Cutting.

Cost control, also known as cost management or cost containment, is a broad set of cost accounting methods and management techniques with the common goal of improving business cost-efficiency by reducing costs, or at least restricting their rate of growth.

Businesses use cost control methods to monitor, evaluate, and ultimately enhance the efficiency of specific areas, such as departments, divisions, or product lines, within their operations.

Cost control is a continuous process that begins with the proposed annual budget. The budget helps: (1) to organize and coordinate production, and the selling, distribution, service, and administrative functions; and (2) to take maximum advantage of available opportunities. As the fiscal year progresses, management compares actual results with those projected in the budget and incorporates into the new plan the lessons learned from its evaluation of current operations.


Decentralization of Profit Centre can help company to do effective Cost Controlling. In this case individual Division/Department/Subsidiary will be responsible for its Profit & Loss Account or Earning v/s Expenses and they need to maintain their minimize margin or Break-Even Point to continue the operation.

The idea of profit centers and decentralization often gets in the way of good management if the idea is taken very seriously. Such ideas are often not what they seem.

Many companies profess decentralization that do not really have it. Profit centers are not necessarily so – if overall corporate profit performance is being optimized. Independent profit centers are by definition neither independent nor profit centers if, in fact, there is any significant mutual interaction or synergy between cost centers.

Right Man For The Right Job

Never allow personal prejudices and preferences to influence the selection of personnel.

Assigning the right job to the right person should follow selection of right persons and giving them the right type of training.

An ideal manager attaches highest priority in placing the right person for the right job because without this the earlier two exercises of selection of personnel and imparting training to them would only go waste.

All are not alike. In fact, all cannot be alike. Accept people as they are and make the best use of them. 

Delegated task must consist of following parameters

1. Task should be a Specific one
2. Task should Measurable 
3. Task should Agreed by second person, unwilling tasks does not extract fruitful results.
4. Task should be Realistic
5. Task should a Timebound to measure.

Go for best use of available resources; assign the relevant tasks to your team-members based on their expertise and willingness. 

It is manager’s responsibility to assure best use of his/her team member with his/her full strength. 

Judgement

Never make judgements based on hasty analysis.

Management prejudice is the worst disease.

It is quite unfortunate that there are many managers who allow many things to cloud their judgement and make prejudicial decisions about people.

Give a person a fair hearing to ensure that the decisions that you make about him are not prejudiced.
An ideal manager will not judge based on half-truth, blind assumption, hearsay, etc.

Manager’s decision should not be one sided. He should consider all available facts before making any decision. As his decision may lead to adverse effects to his team member’s performance.

A Manager should consider following traits before making any decision:

1. Available Resources to find actual facts.
2. Time Consciousness- future implications 
3. Cost Effective (within budget)
4. Good Listening Habit.  Allow manager to get the feedback of other party before taking one sided decisions
5. Positive Attitude. He should not take decision with any prejudice.
6. Organization/Team’s Goal 
7. Confidence.

Freedom to Work

Let your subordinates enjoy freedom in their work; they will contribute their maximum.

People can contribute more when they are given freedom to work. People may need your guidance and advice, but they would never prefer to work under your watchful eyes.

Freedom at work increase creativity. The very confidence in your people that they won’t be blamed for occasional mistakes, if any, will encourage creativity.

As a manager you should share the expectation from your team member, let them choose the way they want to accomplish the task.  But make sure that you try this option with experienced manpower rather than a fresher. 

Business Acumen

Only by earning money does one know its value.

If you want your people to realize the imperativeness of running the organization on profitable lines, you must at the first instance make them aware of the value of money.

Empower your team member with business acumen so they also know the value of savings and earnings for your organization. 

Business acumen is an almost intuitive and applicable understanding of how your company makes money. It includes a thorough understanding of what drives profitability and cash flow, a market focused approach to the business, and an overall big picture understanding of the business and its interrelationships.

Some important Terms of Finance Management:

Profit & Loss Account : A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year.

Balance Sheet : A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders

Cash Flow Statement : A financial statement that shows the amount of cash generated and used by a company in a given period, calculated by adding non-cash charges (such as depreciation) to net income after taxes.

Gross Profit Ratio: The proportion of money left over from revenues after accounting for the cost of goods sold.
Formula: (Sales – Cost of Sales) / Sales

Net Profit Ratio: A ratio of profitability calculated as net profits divided by sales. It measures how much out of every Rupee of sales a company actually keeps in earnings.
Formula: Profit After Tax/ Sales

Operating Profit: The amount of profit earned from a firm's normal core business operations.
Formula: Operating Revenue – Operating Expenses
Operating Profit Ratio: Operating Profit / Sales 

EBITDA: An indicator of a company's financial performance which is calculated as follows:
Revenue – Expenses (excluding tax, interest, depreciation & amortization)

EPS: The portion of a company's profit allocated to each outstanding Share.
Formula: Profit After Tax/ No. of Shares

Trends and Peer Group Analysis: Year on Year Growth Trends and comparison with peer group companies in same industry, helps in understanding the profitability trend & financial health.

Working Capital Management
Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.

Ratio analysis will lead management to identify areas of focus such as inventory management, accounts receivable, payable management and cash management.

Converting Failure into Success!

Take failures as challenges and convert them into successes.

Managers fail only when they give up; those who persevere will finally succeed.

You should always try to learn a lesson or two from each failure and try to correct it in your next attempt. This is the only way to handle failures.

Failure doesn’t mean end of life, keep trying the things after learning from last failure.

It is unfortunate that in societies obsessed with success and achievement, failure can be made to feel like the worst thing that could ever happen to a person. 

Steps to avoid failure:

1. Expect mistakes: No one in world is perfect, you should always ready to expect mistake in achieve goals. 
2. Be motivated: Remind yourself that you are good enough to achieve the target goals.
3. Don’t bother other’s negative views: Don't obsess about what others are thinking; their criticism reflects their own inadequacies.
4. Review what your failure has taught you.
5. Focus on trying again: Keep trying; persistence does pay off.

People who found success despite failures:

Colonel Sanders : The founder of KFC. He started his dream at 65 years old! He got a social security check for only $105 and was mad. Instead of complaining he did something about it.

He thought restaurant owners would love his fried chicken recipe, use it, sales would increase, and he’d get a percentage of it. He drove around the country knocking on doors, sleeping in his car, wearing his white suit.

Do you know how many times people said no till he got one yes? 1009 times!

Walt Disney: The man who gave us Disney World and Mickey Mouse. His first animation company went bankrupt  He was fired by a news editor cause he lacked imagination. Legend has it he was turned down 302 times before he got financing for creating Disney World.

Albert Eistein: He didn’t speak till he was four and didn’t read till seven. His parents and teachers thought he was mentally handicapped. He only turned out to win a Nobel prize and be the face of modern physics.

Thomas Edison: No list of success from failures would be complete without the man who gave us many inventions including the light bulb. He knew failure wouldn’t stop him.

If I find 10,000 ways something won’t work, I haven’t failed. I am not discouraged, because every wrong attempt discarded is another step forward.

Determination and Perseverance

Determination and perseverance will yield result.

Once you are determined to reach your goals, you will discover opportunities available and use them to the best of your advantages.

If you lack determination, you may not be able to spot the opportunities, even if they are right your nose.

Having spotted the opportunities, next requirement is perseverance, to make the best use of the available opportunities. Perseverance may not always guarantee success, but lack of perseverance guarantees failure.

Steps to be determinate to your goals:

1. Believe in yourself! Believe you can do what you want to because with effort and determination you can do whatever you put your mind to. You definitely achieve the assign goal if you believe in yourself. 
2. Set a goal and stick to it. Don’t change your goal statement frequently, be focus on single goal only. The goal will be achieved only if aimed at without getting distracted.
3. Understand that there will be good and bad times.

A manager cannot lead his team if he has not fixed his aim it will only be like one blind man leading the others. Be determinate to your goal. Because “a quitter never wins; a winner never quits”.

"A man can be as great as he wants to be. If you believe in yourself and have the courage, the determination, the dedication, the competitive drive and if you are willing to sacrifice the little things in life and pay the price for the things that are worthwhile, it can be done." -Vince Lombardi