Steve Hayward discusses the potential risks and detrimental effects involved in cutting costs
Steve Hayward this discusses the potential risks and detrimental effects involved in cutting costs.
There is a well know saying which states: “Buy cheap, pay dear”. An equally common expression is: “If you pay peanuts, you get monkeys”. The French say: “On a rien sans rien.” (You cannot get something for nothing) while the Spanish equivalent is “quien algo quiere, algo le cuesta”.
You start to realise that we all pretty much agree the world over that if you cut corners on price there is a very good chance you will pay for it later. So why have we become obsessed with driving costs down irrespective of whether this actually has a detrimental effect upon us and our objectives?
There are some who argue that this is deep rooted in the belief that everyone is trying to pull one over on us and that we will develop a reputation as being gullible if we do not squeeze every conceivable discount out of our suppliers. Others lay the blame at the door of the internet saying that since we can now compare and contrast virtually any product or service available in the world we can therefore secure the best possible price. And the best price is of course the lowest price isn’t it? You don’t sound too sure. Nor am I.
I once spoke to a consultant in another industry who simply said when he got fed up with his clients asking for a discount he simply quoted double his daily rate and gave them a 50 per cent discount. They went away happy but interestingly enough he said he begrudged working for them and never felt he gave them the same level of service as he did those who had paid the full price. Both clients paid the same price but the psychology of the situation struck a chord with me. I don’t want to be seen as cheap and I don’t want to be undervalued. No one does. So are we really searching for the greatest discount, the lowest price or are we searching for the best value. With value added terms bandied around like they were new toys, engineers can be forgiven for wondering how they let the bean counters take over without putting up more of a fight.
So what is best value for money? One prospect said they were only interested in two criteria: Quality of service and price. Now I can relate to this but is it really that simple? What about safety for example. At what point, I wonder, is it acceptable for that individual to compromise safety in favour of price? “Never!” I hear you reply and that is exactly as it should be. So we now have three elements: safety, service and price. Reputation and trained personnel are also important factors often cited as the reason for including our company on a tender list, taking the total criteria up to five.
Some organisations simply rotate the companies used, believing misguidedly that this keeps prices down. It does not. It simply undermines trust and loyalty – two other highly valued considerations. Another is honesty. All too often we hear of scaremongering of clients with bogus inspections by some of our less scrupulous competitors. So now we have eight key criteria:
Safety, service and price, reputation, training, trust, loyalty and honesty.
I am not saying for one moment that a large price saving is impossible to achieve. We regularly save our clients over 20 per cent on the cost of conventional maintenance by employing innovative techniques and using the latest materials. The problems occur when the price reduction comes at the expense of increased risk. This I cannot accept and nor should our clients. Their bosses are not going to be very forgiving with them if everything goes wrong. So when such recommendations regarding new techniques to effect significant saving are made, clients look to our experience and expertise to give them reassurance that what we are proposing comes with no additional risk, taking the total criteria to 13:
* Innovation, experience, expertise, reassurance and risk avoidance. As with any relationship once you understand each other better, the confidence you engender grows. Keeping things simple and attention to detail are two of the most important elements I have found that help build a client’s confidence in you. Demonstrating commitment and reliability also accelerates this relationship building process and increases the count to eighteen:
* Confidence, simplicity, attention to detail, commitment and reliability. Finally, adhering to strict time frames and budget may seem obvious but there are few things that will please your boss or a client as finishing a job on or ahead of schedule and on or under budget. They best way to do this I believe is to deliver outstanding quality of work, being as prepared as you can be for the unexpected and to anticipate and have the capacity to handle additional work that may be required, making a grand total of 23 fundamental factors.
* Adhering to budget, timing, quality of work, capacity and planning. So it is important not to become obsessed with the cheapest price. Be wary too of those who promise 110 per cent. How can someone give you more than 100 per cent? The best explanation for this sort of silly over-claiming is in this simple joke. If you number the letters of the alphabet A–Z, one to 26, I was told, you can work out what 100 per cent is worth. For example, the sum of the letters in the words ‘Hard work’ = 8+1+18+4+23+15+18+11 = 98 per cent and the word ‘Knowledge’ = 11+14+15+23+12+5+4+7+5 = 96 per cent while ‘Attitude’ (1+20+20+9+20+21+4+5) = 100 per cent.
So, one can conclude with mathematical certainty that hard work and knowledge will get you close, but the right Attitude will get you 100 per cent. I will leave you to figure out what words add up to over 100 per cent and will put you over the top!
Please forgive me for appearing cynical but the next time someone says there are only three things that matter to me ‘price, price and price’ ask them if they mean the lowest price or the best value. There is a vast difference. The former is riddled with risk and uncertainty. The latter will give you more than you were expecting and no less than you deserve!
Steve Hayward is with Delta International, which specialises in the maintenance of chimneys, Oldham, Lancashire, UK. For more information, visit www.thinkdelta.com
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