Is your Cost-Orientation a hindrance to Company Growth?
Research reveals that brain at
any given opportunity does try getting into the comfortable zone, what makes
our Habit. If the same theory is applied on organisations which are considered
living entity, brains of employees try doing routine, controllable activities.
Every organisation – for any
activity, big or small does follow the Principle of Planning to undertake an
activity. But deep down every activity being undertaken is seen under the lens
of cost. Therefore, planning, invariably turn out to be a ‘Cost Planning’. Reason,
cost planning by & large is under the control of the company. In other words,
cost planning makes a company becoming its own customer. For example, decisions
pertaining to how many employees to hire, how many machines to procure, how
much raw material to purchase, how much money to spend on capex etc. This
nature of the organisation displays the peculiar traits associated with a customer
and like any other customer, the organisation decides to stop buying a particular
practice or service. Focus therefore remains the cost. However, as always,
there are exceptions to it where company has no control over some of the costs,
as it may be imposed on it under some laws. Bust such costs as imposed on a
company by others make up a relatively small fraction of the overall cost.
Primarily, most of the costs are derivative of company controlled costs. Do
agree with me on it, Reader?
But very axiomatic question
comes to mind, why companies get into such thinking mode? Simple reason- it is
very easy to plan controlled costs with relative precision. It is this tendency
of organisations which turns out to be anti-growth for them.
Mind it, I am not saying cost
planning should not be done, but one must ensures that those costs which can
help organisations grow further, should be undertaken. Strategy oriented costs
should not be seen under the lens of Cost Planning.
Second obvious question comes in mind is when
learned professionals know flip side of this approach, why then does it happen?
To my understanding, it is due to ‘planning-oriented-mangers’ tend to apply
familiar, comfortable cost-side approaches to the revenue side as well;
treating Revenue Planning as virtually identical to Cost Planning. But that
does not in fact work for Revenue Planning. Revenue Planning is in the hands of
customers and not under the control of organisation except in case of
“Bottom-line for ‘Bottom-line-obsessed
companies is predictability of costs, is fundamentally different from the
predictability of revenue.”
I can very well say, if companies
want to grow, they must apply different principles to Cost Planning and Revenue
Planning, or otherwise they will become redundant one day, as cost whatever one
does will be having spiralling effect. No one can cut every cost. Revenue be
given more importance to cost without blinking on cost under control approach.