Think Outside the Box

Companies can get set in their ways, just like people. They engage in the same business practices - because that's the way they've always done things - and don't realize that a stagnant attitude holds them back from reaching their full potential.

Here's the story of a manufacturing/distribution company that has been in business for half a century. Over the years, the company had built in some profit leaks that needed plugging.

So they brought in outside consultants who suggested the company encourage its employees to start thinking outside their individual jobs - coming up with macro versus micro ideas.

When you hire an employee, it's usually for a specific position, say sales or reception. Staff members tend to think only of their duties. They develop a micro view of the company, rarely seeing their role in the bigger picture.

When the company's employees were encouraged to think in larger terms - to consider ways to make the bottom line healthier - ideas started to flow. One employee found a cost leak that, when plugged, saved enormous amounts of money and significantly bolstered the firm's bottom line.

The leak involved the firm's shipping policy. Shipments were free regardless of size or timing of orders. It had been that way for fifty years and no one ever suggested changing it. However, this employee estimated that eliminating the policy would save the company at least $100,000 a year in freight costs.

At first, the fear factor set in: Would a change this dramatic cause customers to go elsewhere? And what if customers were looking to cut their own costs — wouldn't adding shipping to their expenses cause dissatisfaction?

Good points. But the potential cost savings outweighed the risk. The company could save money in billing, order-taking, picking, packing, shipping, paperwork, packaging, overall labour costs, and of course, the costs involved in freight.

The strategy worked. Not one customer left because of the new shipping rules. In fact, customers were shown how they, too, could save money under the new policy. The distributor's staff talked them through the plan and helped them see it would be good business for them.

Why? Customers became more efficient in their inventory and ordering policies; They began to order monthly, rather than weekly, cutting back on the time and money spent placing orders, tracking inventory, unpacking and storing shipments.

For the company, processing became more efficient and regular. Warehouse labour costs dropped dramatically. Net profit ultimately jumped threefold. All from one simple idea.

''"We want factories where the whistle blows and everybody wonders where the time went, and then somebody suddenly wonders aloud why we need a whistle. We want a company where people find a better way, everyday, of doing things."
- Jack Welch, retired CEO of General Electric ''


The point: It's easy for your business to get stuck doing things a certain way and miss opportunities to clamp down on profit leaks.
The solution: Control your expenses so they are watertight. Challenge what you are spending and why. Set up a culture that encourages global thinking. Question all of your policies to ensure they still make sense. Prompt your employees to think about their role in the bottom line and you'll soon find profit-boosting ideas flowing through your company like sap from a maple tree.