Steven Martin | Business Solutions

Why Suggestion Programs do Not Work

Why don’t suggestion programs work?

The typical suggestion program or suggestion box is an open ended and unstructured solicitation of ideas. They will typically end up:

As a place to put “nice to have ideas” rather than improvement projects
As a venue to complain
An expense rather than a savings
A disappointment for all
Annoying and disengaging participants
Wasting a lot of time and money

This happens because:

Suggestions that are submitted drop into a “black hole” or
Some suggestions are implemented and others are ignored
Goals are unclear
They lack adequate structure
The participants and not adequately trained
Expectations are not set and guided
The criteria are muddy or missing
There is little or no reward for participation

If you want ideas from your employees, use world-class methods such as Lean, TQM, ISO, Six-Sigma or the Business Solutions: The Positive Way Profit Improvement Process.

One organization with tens of thousands of employees gave up after less than 36 months when they found out that they were not only NOT saving money but they were increasing costs and reducing morale. Painting the ladies bathrooms pink was just one of the suggestions that was rejected because there was no clear ROI. That rejection and others did not go over well at all.

If you are serious about improving your financial situation and sustainability, you need to get serious about having a structured program that engages your team and leadership from the top. We know the ways to do this well and will be happy to review them with you.

Paper Losses

A typical office may have anywhere from 4 to 20 different types and brands of paper in its inventory at any one time. This may not seem to be a significant issue but paper costs anywhere from $0.006 (low-end standard copy paper) to $1.00 (fancy letterhead) or more per sheet when all costs are included.

An analysis for one organization found that the lack of standardized purchasing allowed them to spend about $85,000 each year in extra costs just for copy paper. We conducted the analysis in this manner:

-Examine purchasing invoices for copy paper

-Tabulate the costs paid for each quantity

-Calculate the savings possible if the lowest cost supplier had been used

The recommendations were to centralize purchasing decisions and to communicate standardized purchasing procedures to those people who managed the paper inventories at dispersed locations.

The analysis did not determine how much could have been saved if less paper had been used but the qualitative judgment was that the savings could have exceeded the purchasing savings.

Paper losses like these are an indicator of even deeper loss of control over expenses.

Wasting Money on Space

Space is an asset until it is no longer producing adequate income. Then it becomes an anchor on profits. Remember that the costs of using space go far beyond rent, lease payments, mortgages, taxes and utilities. Here are four steps to take to see if you can reduce your space costs:

Dig deep and find out what the true cost of ownership is for every space you have.
Review how productive each space is for your business. How much revenue does it support or generate? Retail space is usually measured in revenue per unit space (e.g. $/square foot).
Ask yourself what would happen if we reduced or eliminated this space?
Once you know the answers to #3, see if you can eliminate the space, reduce the space or put it to other productive uses.

One of our clients that did this reduced costs by $95,000 per year and then sold an entire building for a significant profit.

Seven Hidden Costs

Are you paying for these seven hidden costs? Do you want to save money? One recent study showed that about 30% of credit card holders pay $100 or more in hidden costs each year and 10% pay more than $500.

If you take the time to look over your personal credit card statements and regular bills it is quite likely that you will find one or more hidden costs. If you challenge your budget managers and accounts payable teams to do the same with your business bills, you will find even more.

Here are 7 common hidden costs and what to do to eliminate them:

Fees for services you no longer need. Replace that rented modem with your own and get a 6-12 month cash payback.
Renewal fees you never wanted. Many trial offers and “free” online deals come with very fine print commitments to renew automatically. If you had to give a credit card number for that “free” offer, assume that there will be a charge next month. Find them on your bills and cancel them.
Hidden fees are common on phone, utility and other bills. Contact the vendor and challenge your bill.
Phony bills are more common in business than in personal life. Cheaters count on our accounts payable personnel paying bills that look legitimate. Directory advertising is a common subject for phony invoices. Make sure everyone reads the fine print and that people who know what they are doing review the bills.
Unwanted subscriptions. Publishers count on your automatic renewal and some send invoices years in advance of expiration. Check the expiration date before paying any invoices. Cancel those you do not want.
Sneaky surcharges. You may have negotiated a fixed price but you must check the invoices to see if the provider has added a surcharge without informing you. Challenge unapproved surcharges and renegotiate or rebid as appropriate.
Unused services. Phone companies and others such as software vendors who charge by the line or seat count on you not checking to see how many you actually need. Do an inventory and eliminate the excess. One client cut over $100,000 per year from their IT budget with this simple action.

Even scrupulous companies count on busy managers to miss these details and pay more. Now that you are alert you can save yourself and your business hundreds to tens of thousands of dollars every year.