Nick Ruhmann
November 14, 2016

ARTICLE: Don't Cut Costs, Develop People

No matter how much people know better, no matter how much "lean" training and no matter how many Goldratt books management has read the sad truth is that it is all forgotten when the decree comes down from above to lower costs.

They forget about long term impacts and immediately go to where they can slash costs in the near to short term.
Talk goes almost instantly to cutting "heads" and slashing the easy (but low impact stuff) things like the free coffee, or employee Christmas party. 

[I hate the term "heads" by the way...if only we allowed our employees to actually use their heads]

Sadly most businesses find themselves in these situations because they don't do the right things earlier before the situation has become dire.

There are warning signs that you've run out of time:

  • You start losing out on orders and sales
  • You stop hearing from your customers, even to complain
  • your competition has met or beat your price....and is starting to lower the market price (what your customers are willing to pay for your product or service).

Unfortunately most company's have this cost+margin=price, formula in their heads and aren't willing to lower their price , or take the healthy approach to lowering the cost... instead assuming that the competition is just accepting a tiny margin or a loss to steal their customers (this can happen, but either way the correct response should be the same)

Instead they waste time whining about it or falling under the illusion that the competition won't be able to keep it up and sales will return.

"It'll come back, it always does", they say...that's probably true, until it's not.

Here's the deal. Start now, don't wait for the crisis, or it may be too late. The solution isn't massively cutting labor, a new automated piece of equipment, new software application, squeezing your supply chain, or calling (please God no) a consultant.

Let's just be clear, there are some REALLY good consultants out there. I know I bag on consultants a lot, but that's because there are many, many more BAD ones than good ones...caveat emptor.

The solution is your people, engage them, be straight with them, reorganize if needed to give them support...if you don't have a leader for every 10 or so employees (including your hourly staff) then you're doing them a disservice.

[Note: Even 1 leader per 10 people is a stretch, 1 per 5 is better]

EVERY person needs a mentor and coach, even the CEO.

Yes C-Suite guys, you need a coach too. Unless you're done learning?

Stop delegating problem solving to "experts" or "professionals".

Problem solving shouldn't be a special skill, its THE skill that should be nurtured and coached in everyone at every opportunity.


Before you discount what I'm saying, let me expand a bit. What do you think is common among all the commercialized problem solving techniques out there? Six Sigma, A3 problem solving, 8D, PDCA, etc....they all share a basic method that we are all introduced to by 7th grade science class:


The Scientific Method. Yeah that one. Ask Your Local Science Teacher.


Simple, logic based problem solving....have a problem, come up with a hypothesis, predict what will happen, and test the hypothesis.

[test group and control group, i.e. your idea vs. your standard]

Then, the actual results. How did they compare to your prediction? Comparing the two is how you learn from the results. Everything else is fluff and fancy techniques meant to wow and keep the general masses from eliminating the need for high priced professionals and consultants.

The problem is that what your people need to get good is practice and a good coach. Hence my comment about leader to team ratios....heck even the military knows that there should be a leader for every 10-11 soldiers...because more than that and there isn't enough leader to go around.

Our professional salary ranks seem to recognize this too...check your own workplace out...I bet each director has less than 10 managers, and every manager has 5-10 supervisors etc...but as soon as you hit the last level on the salary org chart we find supervisors that are expected to coach and mentor 20,30 or even 40+ you want mindless employees that check their brains at the door and just need a babysitter? Or do you want skilled problem solvers that return value to your company?


You're not going to get both....and don't ruin the opportunity by sending in experts to solve their problems for them, you'd be robbing them of the chance to practice!



Provide guidance and mentoring, but let problems be solved at the lowest possible level of the organization possible. It will breed better, more confident, and valued employees...and having ALL your employees out there solving problems will get you far further and far healthier than any cost cutting push or swat team of "CI experts".

"If you don't try something, no knowledge will visit you" - Chihiro Nakao to Art Byrne of Wiremold

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