Most organizations are cost-conscious to a fault. In fact, a goodly number of organizations are working against their customers and parts of their own organizations. CFOs state that "costs must be controlled or cut back". This creates a culture of suboptimization where individuals focus on their own span of control to cut costs thus negatively affects others. Management sets cost savings goals without guidance on how to do it intelligently. For instance, a servicing portion of a company cuts proactive customer service to save costs thus negatively impacting customer satisfaction and the sale of new products or services. It is true insanity to manage costs to the point to impact revenues. What are the symptoms or results of unguided or constrained cost-cutting efforts?
Slave to Metrics:
While it is important to measure, some organizations measure too much and expect all the numbers to move in a direction set by management. This creates a mentality that forgets common sense. Let's look at the Boeing 737 Max. Management set an impossible schedule and forced reuse of an existing airframe. While bigger engines were added, the software that compensated for the effect of these engines and placement were short-changed. The software development was completed by the lowest cost resources that were not great at excellent testing practices. Boeing also cut redundant measuring devices making it a higher cost option for the airlines. Suboptimal cost-cutting had tragic results. The metrics of Boeing and the airlines came first.
Culture of Lower Quality:
Boeing also did not develop simulators or require airlines to do so. Instead, some light training was put in tablets for pilots. Boeing sold the idea that real simulation and training was not necessary as the 737 Max so similar to existing 737 fight behavior. Additionally, many airlines are configuring this new 737s in a way to cut customer comfort from seats to bathroom sizes. There is plenty of this kind of quality reduction in every industry to the point of inflicting pain on customers and employees.
Customer Neglect/Bad Experiences:
Most organizations are optimized for organizational outcomes and business processes that benefit the organization at the expense of the customer. Smart organizations are now additionally focusing on customer journeys and customer goals. Brilliant organizations are looking at their organization's role in the complete customer journey. Organizations, wrongly so, think that they are the center of the customer's journey or experience. An example would be mortgage companies believing that the loan process is the center of buying and settling into a new home. While one can appreciate a faster and easier loan process is good, it is only one piece of the real journey.
The mistake that most CPAs commit is to think short term cost-cutting is always a good thing. While the effect might please the existing management and help stock values in the short term, there could be long term impacts. Some times looking at the long term impacts and balancing customer outcomes with automation results is really the good thing. Obviously, there will be role and goal conflicts that include costs, but the CPAs should not have the last say.
The focus on cost containment and short term result run headlong into the need for investments necessary to be future-ready. In this day and age of digital transformation, investments are needed now. Certainly, automation investments seem like a good deal for the CPA, but other investments are necessary to keep ahead or up to competitive levels. If the economy heads in another direction, then the window for digital investments that are not automation focused will be closing quickly. Invest in digital separation while the time is right.
Cost micromanagement without regard to long term or important investments ruins organizational cultures and beats down innovation. It also loses business as exhibited by recent cancelled orders for the 737 Max. It's time to move from "CPA Insanity" to organizations that are crazy smart by creating customer excellence while automating.