Swings + Roundabouts Spring 2021

The first tale will be well-known to most readers, and you should feel free to insert the name of your chosen workplace, as you see appropriate. This tale is about the push for economy (sometimes referred to as cost-cutting), and most people will have experienced it in one workplace environment or another, at some time in their lives. Now, it is fair to say that there is a time and place for cost-reviews, particularly in business environments which have undergone significant organisational change without re-alignment of available resources. From time-to-time, it can be quite valuable to review inputs, processes, and expectations, in order to trim costs or re-allocate resources (particularly in fast- paced or innovative industries). The problem arises when cost-cutting becomes a standard ‘go to’ strategy for management, and when organisations continually look for opportunities to economise beyond reasonable levels. In my former work-life as an academic, I was familiar with the annual call to reduce departmental costs, and the negative impact which this strategy brought with it. Let’s be blunt about this: Excessive economy is counter-productive. It drives down morale, reduces capacity to respond to new opportunities, and can actually drive costs up (for instance, when maintenance is deferred, or when high-paid staff are allocated to chasing low-cost savings). Driving costs down is the ‘input’ component of the productivity equation. If we can make sensible savings here, then it is worthwhile for us to do so. For instance, by adopting new production and process methods, or by negotiating better deals on raw materials (e.g., by joining a buying group which can offer better prices in exchange for volume purchases across the group). However, economising inputs will ultimately hit a brick wall, beyond which it is inefficient (or even impossible) to make further savings. A better strategy, is for organisations to shift focus to the ‘output’ component of the productivity equation. This is where businesses can make significant improvements in productivity, without ‘hitting the wall’. The longer runway at the output end also allows for more innovation, better income-generation opportunities, and better engagement and involvement throughout the entire organisation. The third cautionary tale comes from the Thomas the Tank Engine stories, which my kids absolutely adored when they were much younger. In one of the stories, one of the locomotives had a poorly designed firebox, which affected the amount of energy that the engine could produce. In an effort to increase the output, a special Welsh coal was brought in just for this engine, and the result was a clear improvement in performance. However, the new coal came at a higher dollar cost, and eventually the engine was redesigned and rebuilt, following an accident. The change from low-yield coal to a higher energy (and higher priced) alternative was a tweak to the input side of the productivity equation. It ‘did the job’, but couldn’t overcome the fundamental problems associated with sub-standard processing. The Tank Engine story serves as a reminder that sustainable long-term solutions are more a matter of design, rather than short- term quick-fixes to inputs. Ironically, one of the apparent paradoxes of productivity is that as efficiencies increase and demand for the product output rises, then demand for the input material can also increase. This is known as the Jevons Paradox. In the mid-1860s, William Jevons noted that demand for coal was increasing at the same time that coal burning engines were becoming more efficient. Other cited examples of the Jevons Paradox include water usage and air travel. In a recent nod to this paradox, Tesla founder Elon Musk has stated that increasing efficiencies in electric vehicle technology will result in more cars (not less) on the road, and an increasing demand for roading infrastructure! The second cautionary tale is about a recent client of mine, who had the admirable idea of building his new product from waste materials. He reasoned that, by collecting unwanted material which he could re- purpose, his business could deliver an environmental benefit, while simultaneously reducing his purchase cost of raw materials to zero. Both are admirable goals, one being eco-friendly, while the other is clearly business-friendly. The problem for both goals came when we started to explore his business requirements a bit further. Yes, he could get the raw ingredients for free, but he needed to collect four different materials from multiple sites, and then to sort, clean, and process them, before they would be ready for his use. As none of this activity was core business, he was dangerously close to needing to set-up a second start-up business, just to supply his first business! The message here, is that not everything which is ‘free’ comes without a cost. We can sometimes be guilty of making false economies, particularly when we accept donated goods, or sight-unseen merchandise. Be careful what you accept as donations! About the author Phil Sales is specialist business coach, interested in 'cool stuff' in the business development sector. For more about Phil, see https://iact15.wixsite.com/iactltd/who-we-are So, what could this all mean for early childhood education centres? Well, one lesson for the ECE sector might be to avoid excessive cost-cutting as part of your sustainability / productivity strategy. Another lesson might be to concentrate on improving your outputs, in whatever form you measure them. Remember, this is where the real gains are to be made, from a productivity point-of-view. 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