I currently sit on three nonprofit ministry boards. Two of
the three (and their chief executives) struggle with constraining expenses
within declining revenue. But, after watching the behavior these days of
for-profits, I’m also concluding that even for-profit organizations have a
hard time addressing and reigning in costs, especially as revenue drops. John
Seddon, the UK
consultant and writer on systems thinking and lean management, says that
focusing on costs will invariably result in increased costs. Focusing
on excellence in customer service (and what the customer wants and needs)
will result in lower costs, sometimes dramatically lower costs as well as
the likelihood of increased revenue. It is much easier for us executives to
work on planning to increase revenue. (Although this may be an exercise in
hope rather than strategy.) What Toyota did over 50 years is amazing since
its focus was Kata - constant process improvement to improve product value
while doggedly removing unnecessary cost (“waste”) - creating a entire
culture of workers motivated and skilled at that while never losing sight of
the customer.
Not-for-profits (except perhaps health care) are generally not as customer focused (in
terms of “product” satisfaction) and usually are much more revenue focused,
paying little attention to cost management and unable to cut costs even, in
many cases, with disaster staring them in the face.
They and their boards attend development and fund raising
seminars and training and rarely courses on better, tighter management or
financial leadership, rationalizing their actions in spiritual or ideal
terms. In ministries, since it is the Lord’s work, He’ll provide - on the
revenue side. I’ve never heard a prayer for wisdom on how to cut back.
(Though I trust such have been offered somewhere.)
Cost management takes
a completely different mind-set or attitude - lean thinking, being creative,
going against conventional wisdom, reconstructing processes, etc. This is
true in spades for educators.(Originally posted on our website Dec. 4, 2012)
RMB
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