Navigating the Balancing Act of Cost and Service Prioritisation in Business

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The quest to improve profitability, reduce cost and prioritise spend in business often feels like walking a tightrope. If we take the project world, on one end, there is the allure of expensive consultancy, promising comfort, and expertise. While on the other, the temptation to manage changes internally to save costs looms large. But how do we find equilibrium in this balancing act? Let us delve into this conundrum through a series of questions that every business should ponder.

Have you experienced this?

Chances are, if you have been involved in project management, you have encountered the dilemma of cost and spend prioritisation. It is a global challenge that transcends industries and company sizes.

Did you try to use your own resources?

Many businesses, especially smaller ones, opt to manage changes internally to cut costs. While this may seem prudent at first, it often leads to indirect costs that can outweigh the initial savings. For example, a wrong choice of software selected on the merits of functionality but which does not have the underlying capabilities to meet the needs of a growing business such as integration, differentiation, support or security levels can be a very expensive mistake. Involving a seasoned professional would help to avoid this by making sure all requirements, functional and non-functional are understood and considered in the selection.

Do you look at the indirect costs?

Beyond the surface expenses, it is crucial to assess the indirect costs associated with DIY project management. These can range from lost productivity to compromised quality, impacting the bottom line.

Did you consider the costs of a project manager?

Investing in a project manager may seem like an additional expense, but it is essential to weigh the long-term benefits against the short-term costs. A skilled project manager can streamline processes, mitigate risks, and optimise resource allocation, saving both time and money.

How does company size affect budget allocation?

The mindset around prioritisation of cost and spend versus service differs between big corporations and smaller enterprises. While larger companies may have more resources to invest in consultancy, smaller businesses often face budget constraints. This forces them to make tough decisions about resource allocation.

So which resource should a small business prioritise?

Of course, having a business analyst to help ensure the problem is framed correctly and the requirements are all understood, weighed up and prioritised will be beneficial. But then who can make sure this get implemented correctly and without unwanted impacts? For smaller businesses, the return in investment of having an expert for every field would not justify it. Where a change is more complex and budgets are tight it is worth considering a different type of expert, someone that has a record of problem solving and successful delivery. Selecting the right people for the job at hand is crucial. Paying a bit more for one resource can save the cost of multiple resources at a lower unit price as well as the cost of when things go wrong.

Case Study: Lessons from well-known supermarket brand

I want to share with you an example I have recently experienced from a well-known supermarket chain traditionally known for its convenience and customer service. Despite its stature, my local store experienced a setback when two fridges malfunctioned. Two weeks later they had not been repaired, affecting the sale of ice creams during the hot week we had recently. While the application of lean principles in the past initially helped resolve issues quickly, the desire to reduce the cost of maintenance has eventually led to a reduced maintenance service level. In turn this has led to prolonged downtime with an obvious loss of sales coupled with customer dissatisfaction! This highlights the importance of prioritising critical resources based on seasonal demand and customer needs. A delay in fixing the ice cream freezer midwinter has a significantly lower impact than during summer.

Thrifting Direct Costs: A Double-Edged Sword

While opting to avoid direct costs may seem prudent, it can often lead to unintended consequences. Delaying necessary repairs or investments may save money in the short term, but it can result in longer lead times, decreased customer satisfaction, and higher costs and lower revenues overall. Addressing a hit on profitability by further thrifting risks becoming a self-fulfilling prophesy of decline.

Avoiding Costly Missteps

At the heart of effective prioritisation of cost and spend versus service lies the need to address foundational issues proactively. By identifying and rectifying root causes early on, businesses can prevent unnecessary expenditures and optimise resource utilisation. The tried and tested approach of remediation through corrective action and preventative action (CAPA) is a terrific way to start this. Corrective action aims at fixing the immediate issue at hand. This should be followed up by preventative action that puts in measures to avoid this happening again. And when indirect costs are considered, eventually, businesses can achieve an improved service level as well as improved profitability as the cost of unintended consequences will have been avoided.

Working Smarter, Not Harder

In an era where efficiency is paramount, the trend of working smarter, not harder, is gaining traction. By adopting a strategic approach to prioritisation of cost and spend versus service, businesses can achieve greater agility, resilience, and success in an ever-evolving marketplace.

In essence, the key to navigating this balancing act lies in strategic foresight, prudent resource allocation, and a commitment to continuous improvement.

So, the next time you are faced with the dilemma of whether to splurge on consultancy or handle changes internally, remember to weigh the costs. Consider the implications and impact of unintended consequences, and chart a course of action that aligns with your long-term goals and mitigates risks. After all, for a successful outcome, every decision counts.

About the Author
A Change and Programme Management professional with international experience in business transformation, from strategy definition to implementation and covering all dimensions of change: sourcing, contracts, policy, process, IT, infrastructure, behavioural, organisational. John is a Fellow of the Institute of Consulting, a Change Management Practitioner, and MBA qualified who has delivered change and integration of customer facing, commercial, operational and back office capabilities in various organisations.

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