According to the Slovak Statistics Offi ce, the profits of Slovak businesses dropped by more than one-third in the second half of 2009 compared to the same period in 2008. This means that cost optimisation and effi ciency are urgent and important parts of managers’ decisionmaking processes in most companies.
Through this regular column in The Slovak Spectator we want to provide professional advice on how to manage the crisis’ impacts in the most effective way and we will provide you with recommended methods and tools to use. In this first column we will describe the basic definition and the framework for company optimisation.
OPTIMISATION in a wider, general sense, means adjusting a company’s mechanisms so that it works more efficiently in the future than it does now. It means an effort to achieve the company’s greatest possible effectiveness. Put in financial terms, it means bringing a company to the condition when positive manifestations of measurable financial values such as costs, profit, cash flow, and the company’s overall value improve over time.
COST OPTIMISATION aims at reducing the baseline costs of a business while maintaining acceptable quality and service levels. Cost optimisation must be done in such a way that it does not undermine the organisation’s efforts to capitalise on future growth opportunities.
If your company has decided to optimise, we offer our recommended basic principles of optimisation:
• Always have your firm’s strategy in mind. If the firm has been built on healthy fundaments and has operated for a long period, there is no reason to change strategy for one or two years. Optimisation should serve the firm’s strategy, not the other way round.
• Assess the firm strategically on all levels, meaning as a whole (corporate), then individual SBUs, and only then at the level of functional strategies (sales, marketing, HR, finances, IT, R&D)...
• Optimisation does not mean layoffs. It is only one of several possible tools and, often, not the most important one. Communicate, involve your employees and motivate them. Be an example for them.
• Risk – cautiously. However, be prepared for the fact that “it might not turn out well”. Try to have a “Plan B” (an alternative) because it might be useful.
• Remember that it is true for a firm, just like for a human body, that if you lose weight quickly and don’t start a healthy lifestyle, your weight will return back to its original.
• Don’t forget to sell, produce, and motivate employees as well as to search for business opportunities. The crisis offers opportunities to those who are ready and prepared.
Before you start implementing optimisation in your firm, ask yourself some questions – check whether the model of optimisation chosen for your company is:
• Appropriate – is it based on the current status and environment of your firm?
• Approvable – does it have the support of the owners based on examined risks and return on investment?
• Realistic – does your firm really have the necessary resources and know-how for optimisation?
In the next column to be published on March 15 we will have a look at the recommended Process of Optimisation.
By Marek Fajčík, Spiralis s.r.o., www.spiralis.sk
3. Mar 2010 at 0:00