Business Writing Sample #3: White Paper

By Mike Johnson
© 9/96 Clement Communications, Inc.

Welcome To The Supervisor's Guide To Cost Control
"Here's How To Energize Profits -- And Your Career!"

After experiencing a budget disaster, "Hoover Dam" is NOT the first thing that generally pops into mind. Yet, patterning your cost control programs after the Hoover Dam’s operation may be the best way to energize company profits – and your own career.

Known as one of America’s modern civil engineering wonders, the 726 foot tall Hoover Dam opened in 1935 as the solution to the Colorado River’s spring flooding and fall droughts. Located between Nevada and Arizona, its construction created a dependable water supply for three states in addition to creating the 110-mile-long Lake Mead, America’s largest reservoir. It’s 17 electric generators provide power to 1.3 million people, providing the revenue that makes the entire project self-supporting.

Just like the Hoover Dam, the typical supervisor is also called upon to better meter the flow of resources to avoid floods and dry spells. By carefully controlling the company’s cash-stream, not only are those downstream provided a steady stream of sustenance, but those upstream are rewarded with an ever-growing reservoir of profit. Shrewd supervisors can then use the power produced from effectively harnessing this exchange to supercharge their own careers.

Are You A 'Single-Switch' Supervisor?

Cutting costs is easy. Folks at the Hoover Dam can flip a single switch and save all the water they want – at the expense of the 18 million people downstream counting on its arrival. If you’ve been a supervisor for any length of time, you’ve likely had the "opportunity" to follow one of these "single switch" managers who were so focused on immediate cost cuts that they left the operation in shambles.

Controlling costs is where the skill comes in. Finding that elusive sweet spot between the highest possible profit and the lowest possible cost is the Holy Grail of business. Supervisors who’ve mastered the necessary skills to satisfy both ends of the resource stream are those you see climbing to loftier positions. Those unable to do so, are either totally submerged in a sea of red ink or perpetually swimming upstream.

Ideas Pay For Themselves

The Hoover Dam’s $165 million cost has long since been repaid, plus interest, through the sale of the power it generates. The continuing revenues now perpetually pay for the dam’s operation and maintenance.

Likewise, every issue of The Supervisor’s Guide to Cost Control includes ideas that will easily pay for the entire year’s subscription price. Our editors ceaselessly search out the best cost-control advice from the best companies in America. Supervisors who implement these ideas should receive back through savings, dozens, if not hundreds of times the cost of the annual subscription price.

Tell Your Boss You'll Pay Your Own Salary

Why not apply the same "pay for yourself" strategy to your career?

Imagine making this statement during your next performance review: "As you can see from these four examples, the ideas and actions I generated over the last 12 months saved the company $275,000, enough to pay my salary & benefits for the next six years."

Proving that your cost saving efforts more than paid your annual salary is one of the best ways to earn the highest merit increase.

Now Make Cost-Control Pay You

Face it, the performance review process has its limitations. Despite the "objectivity" of its structure, it remains subjective. For instance, what's the difference between an "outstanding performer" and an "above average" one? All too often, this distinction is garnered not by performance but by perception -- the boss's perception. Surprisingly, perceptions are incredibly easy to improve. Your first secret weapon? An empty vanilla folder.

The trouble with annual performance reviews is that ... well ... they're only considered annually. Mentally reviewing an entire year after it's happened is impossible. By establishing a "win file" that holds copies of all your successes, as they occurred, you can enter the performance review meeting far more prepared than the boss. After all, he or she has to track the results of many employees while you can focus on yourself.

The best "win file" items quantify your cost-control results. Perhaps your efficiency idea saved the company $75,000 in overtime. Or your small improvement on the milling machine resulted in 20,000 more manufactured products. With this type of ammo, the performance review becomes an event you eagerly anticipate.

Why It's Good To Document Disasters

The direct opposite of the "Win File," another folder holds your year's biggest foul-ups. Before sitting down with the boss, you'll want to review each of the disasters, analyze what went wrong, what you learned and what you did to overcome the snafu. Then come up with at least one example of how you've since faced a similar situation and used your new learning to gain a successful result. This process is so effective, after hearing your explanation, bosses often slash a lower rating and pencil in a higher one.

Next, launch some pre-review artillery. A month before the performance review process, offer copies of your "win file" to the boss for his or her review. Add a quick note like: "I know how tedious performance review research can be so I thought I'd save you time by submitting copies of records I've been keeping over the past year." Why it works: Many bosses are not so organized and this gesture alone lets them know you are -- and will be -- ready to discuss every point with verifiable examples. They will either better prepare themselves, or "round-up" in your favor on points they have no examples to back up.

What If Everyone Paid Their Own Salaries?

Use this same system for the employees you review. Once your subordinates understand how saving their own salary impacts the merit increases they receive, performance reviews not only flow much easier, but everyone starts looking for ways to cut spending. Once you unleash the entire department’s reservoir of creative energy toward cost control, your results will go through the roof.

How The Supervisor's Guide To Cost Control Will Help You

Every two weeks, you’ll be receiving the best cost-control ideas available anywhere. Our research reveals that companies with the most cost-control success adhere to the following five concepts.

1. Anticipate the cost of your cost-control plans.
In 1994, according to New York Newsday, Wall Street investment firm Salomon Brothers, Inc. compensated its bankers like the rest of the industry -- according to the deals they generated. But when the overall company began losing money, an innocent question kept popping up. Why should employees get enormous paychecks while the company itself is losing money?

Driven to reduce these costs, Salomon Brothers reined in their golden gooses' monster paychecks by revamping the payroll system, tying compensation levels to the firm's profits rather than individual or departmental performance.

Salomon's new pay plan was designed to withhold any bonus above base pay until the investment banking division achieved an after-tax return on equity of between seven and 10 percent. The plan would've caused managing directors to suffer a huge income drop.

In June, 1995, after about two dozen managing directors defected to competing Wall Street firms, Salomon Brothers threw in the towel and retreated to the old system. Joseph Healey, a director of the executive search firm A-L Associates, summarized why Salomon Brothers' attempt to change the industry's standard pay system failed. "All the other firms on Wall Street recognized it was the best time to poach Salomon people."

Those most successful make sure the cost of their cost-control doesn’t become greater than the anticipated savings.

2. Ask your employees for help.
When the Ritz-Carlton Hotel Company wanted to save money while improving its level of service within the housekeeping department, it called in the best consultants money could buy -- its housekeepers. Not only did the employees' solutions save the company over $1 million a year, but they enabled the daily cleaning of two more rooms with no increase in labor expense.

After researching every aspect of the housekeeping function, the team discovered the primary problems: supply areas and housekeeping carts were inconsistently stocked creating extra steps, and housekeepers were having to manually refold towels after the folding machine spit them out with off-centered logos.

The results of the investigation manifested into a savings to the company of more than $1 million a year on towel purchases alone. In addition, standardization of how towels and supply areas are stocked now allow housekeeping attendants to clean an average of 16 rooms per day versus the old norm of 14.

Companies who are serious about saving significant amounts of money are increasingly creating teams of workers who meet regularly to share ideas for improvements to the system. Cost control teams are based on a simple theory: Those who do the jobs have the best ideas on how to improve them. Often, these improvements are huge money savers.

3. Focus attention on the problem.
Once employees realize that the cost problem is important to you, it becomes important to them. Successful managers constantly focus employee attention on the problem areas yet leave them enough freedom to apply their own solutions. There are three easy ways to do this:

* Employee rankings. Identify the aspects of the cost problem that are the responsibility of each individual in your department. Post their results as often as possible in order of best performer to worst performer. Peer pressure automatically improves results because no one enjoys looking worse than others.

* "Chart meetings." These meetings are a forum where managers present their department's financial results, explaining to those in attendance what went wrong, what went right and what they've done to improve or continue the desired results. By "presenting your charts" to superiors and peers after each reporting period, managers soon begin to react to problems more quickly to avoid having to explain expense blowouts to the group. Furthermore, you will then better research the numbers, work harder at solutions and hold your people more accountable.

* Personal visits. When you visit the various departments under your control, make sure you look at the cost problem area and ask about the most recent results. Merely asking questions is the same as telling the employee the problem is important to you. Good questions to garner results: "What is your plan to improve the results?" "When do you expect the situation to be back under control?"

4. Appoint an Expense Czar.

According to a report in the Washington Post, over the past two years Loudoun County, Virginia school officials have saved over $900,000 in utility expenses throughout the 33-school district after hiring an energy consultant company and creating an in-house "Energy Manager," responsible for minimizing energy costs. "It sounds so simple," said School Board Vice Chairman, James K. Martin, "It's almost too simple. But it works."

In one example, in a middle school computer lab, they turned off computer monitors during lunch time after discovering they overheated the room, sending air conditioners scrambling to catch up. In another example, they turned the kitchen steam tables on 15 minutes later -- little savings that became large after multiplied by 33 schools over the entire school year.

5. Implement well-organized cost-saving programs.

Sometimes employees DON’T have the best cost saving ideas. When you must implement a cost saving plan that originates upstream, getting buy-in from those forced to implement it downstream is paramount. Here’s ten tips for smoother cost-control program roll-outs:

* Provide employees with the reason for the program and the expected benefits.
* Describe what things will be like after the change is implemented.
*Present your cost control program with a positive, upbeat attitude.
*Solicit feedback, listen well and address concerns of your staff.
*Let employees know you are committed to the success of the program.
*Pre-train two employees prior to the roll-out as resources for others.
*Announce the program and provide step-by-step instructions.
*Implement the program.
*Review the program for any problems/feedback/improvements.
*Make needed changes.

Advertise Your Success

Not only do you want your superiors to learn of your successes, you want those on your team to learn them, too. Those downstream are as responsible for your advancement as those upstream. Frequent improvement updates build the credibility needed to launch your next cost-control program, while building your team’s and your own confidence.

Become Your Company’s Cost Control Wonder

The Hoover Dam, one of America’s seven civil engineering wonders, is a great example of a successful cost-control program. By effectively controlling its resources – the Colorado River -- it satisfies the needs of everyone below it and everyone above it, while paying for itself in the process.

Congratulations on positioning yourself to become your company’s "cost-control wonder." By effectively controlling your companies resources – its cash stream – you’ll satisfy the needs of both employees and superiors, while paying for yourself in the process. The almost limitless power you produce from those actions is yours to use as you will.


How To Create An Employee Cost Control Team

Begin by selecting the employees who show the most determination and imagination toward improving their area. Explain that your objective is to discover ways to do the work more effectively and then select three to five employees within your department who directly perform the everyday tasks. Schedule an initial meeting, with yourself or another supervisor in attendance to underscore your interest in the program's success, and ask employees to bring their best improvement ideas.

What's In It For Them?

Prior to kicking off the program, you'll want to establish recognition rewards and cash incentives for great ideas. "Great Idea Awards" can be as simple as engraved wall plaques with light bulbs or painting the employee's name onto an office "Wall of Fame."

Rewards can be as complex as offering cash, gift certificates, trips or a percentage of the idea's cost savings as a bonus.

Other Tips

You'll want to meet frequently enough to gather new ideas and not so frequent as to waste everyone's time. A minimum of once a quarter is a good rule of thumb. It's a good idea to limit "incumbency" to three or four meetings so fresh ideas keep flowing. Make sure you compensate employees for their meeting time and report back to them with the status of their suggestions so they know you're listening. You might even want to hold semi-annual meetings with each of the various team leaders so they can broaden their view of the company.

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