What We Hear on the Street—A bit of evergreen advice from the past
Early in my business career (1975-82) I worked as an operating and financial executive for Gould, Inc. of Rolling Meadows, Illinois. It was a great place to work—there were few limits on what you could do or achieve.
I was recently paging through Gould’s 1973 annual report (not on my regular bedtime reading list) and I found a copy of an article from the October 25, 1973 edition of Iron Age magazine. It was entitled: “When Business Booms It’s Time to Cut Costs” by Bill Ylvisaker and Dan Carroll. I knew both Bill and Dan who were respectively the CEO and COO of Gould, Inc. during my tenure. They jointly were responsible for building an organization that tripled the size of the company by the early 1980’s. Sadly, we have recently lost Dan Carroll.
The Iron Age article was a “how-to” piece on making cost control part of a company’s culture. It discussed the tools that Gould used to measure success, set goals and drive responsibility for cost-management down to first-line managers or lower. Gould was really great at doing this while I was there. Let me summarize some of the keys to their success—
- Forget relying upon the annual budget, there is always more cost reduction to be found; if you look for it;
- Everyone must have a stake in the end results—everyone (down to machine operators or clerks) should be committed to take action and their successes should be broadly advertised and celebrated;
- Every-day cost reduction must be part of the Company culture to be successful;
- Top executives (like Division presidents) must be on the line for results, and their success (or failure) should impact their annual bonus. At Gould, executive bonuses were generally quite large by 1973 standards and, you could bet, a bunch of your bonus was tied to cost reduction; and
- No function or activity can be immune from examination—this is not just an exercise for the factory floor.
Today they call this approach six sigma. Bill & Dan called it The Big Two (2%) cost reduction plan. A little less discipline, science and process change was applied in 1973, but pretty much the same objectives and outcomes.
I suppose many of you have vigorously addressed cost reduction during the last 18 months. But take a lead from Bill & Dan as your business begins to strengthen, make cost control part of your culture—not just something we do grudgingly when a recession is at hand. Gould believed that it could add as much as 2%+ to its ongoing profit. Can you say that about your bottom line?
If you would like a copy of the 1973 Iron Age article for your reading, please contact me.