Taking a Hard Look at Soft Costs
As I talk with my colleague security integrators, the same tone seems to flow. It is looking more and more like 2013 is going to be a flat year. We hear about tighter margins, tougher competition from fellow integrators as well as more from IT providers. This raises the question: How do we adjust to make ourselves leaner and meaner so when revenues are flat we protect ourselves against soft (a.k.a. controllable) cost items?
I often think about how my company can best use our entire team not only to make sure we provide the best product but also control costs while doing so. Do we measure our metrics, and if so are we sharing this information with our people? I believe an informed team operates more efficiently. As I review our metrics, I look at those soft costs we have and evaluate whether or not our people can help us in controlling them.
For example, do we have control of the cost of gas? Do we let our team know how much we spend in gas? If they use some common sense, can they help reduce those costs? Do we track speeding alerts via our GPS? Do we even track excessive idling time? Do we post our drivers’ numbers and challenge them to strive to get the best gas mileage? These are all things that if watched can be controlled.
What about accountable hours, do we monitor those? Probably the most volatile cost we have is labor. Are we working with our teams to assure that each hour a technician works is accounted for? Installation techs should have accountable hours in the high 90 percentiles; service technicians in the low 90s. We need to track hours and challenge our team to hit goals that will save us costs.
Do we truly watch wire and material costs? We can watch, track and negotiate the costs for the equipment we use to provide the systems we sell and service. However, are we keeping tabs on the costs of the wire and materials we use to install them? Wire costs are relatively simple to track, but that does not necessarily mean it is actually being done. How much money is lost due to lax auditing of these materials? Those screws, tie-wraps and other materials can get lost on a project and quickly add up. Thus, we need to challenge our teams to use wire and materials carefully.
As margins become tighter, we need to make sure that our production machines are running smoothly. However, do we share with production numbers with our teams and challenge them to be as efficient as possible and post the strongest production numbers possible? Instead of pushing at month ends to “make our numbers,” do we share with our people the daily or weekly production numbers so everyone knows where we are? Knowing where our metrics are gives us a better chance of hitting those production numbers we need.
Do we listen? Often the best ideas come from those who are in the field dealing with day-to-day issues. However, if we are not careful we can sit isolated in our planning rooms (offices) oblivious to what can (or what may need to) be done in the field to improve. We must confer with those valuable team members and challenge them to think and be a part of the entire enterprise’s success.
Economic challenges can be frustrating. We can respond by saying, “Woe is me,” or we can get our team together and strive to run the leanest, meanest and most successful operation. Good luck, integrators!
J. Matthew Ladd is President and CEO of The Protection Bureau, located in Exton, Pa.
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