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Lean budget cuts: don’t go too close to the bone

Lean budget cuts

April 5, 2017

At the turn of the year we published a blog about the false economy of cutting back on investment in Lean, prompted by some short-term thinking I was witnessing in the manufacturing sector fuelled by economic uncertainty. Despite the government trying to reassure us in the recent Budget that the economy is stable and growing, I’m continuing to see signs of significant concern in the business community, with Lean budget cuts now starting to bite in global teams. It seems to me that the triggering of Article 50 and the forthcoming protracted and potentially ugly Brexit negotiations can only make matters worse.

In business, this decline into starvation mode can be equally dangerous to the wellbeing of an organisation as it is to the human body.  Lean thinking is all about cutting out the fat from your operations – eliminating waste, boosting productivity and building strength – but if you then start attacking the muscle to make further Lean budget cuts, you’ll quickly get down to the bone. The challenge is to find your organisation’s optimum fighting weight: not too heavy, not too light; strong and Lean.

Just as a world-class athlete works with a team of advisors and trainers to continually improve and evolve, to keep smashing personal bests and breaking records, so a business needs to be in tip-top condition to achieve continuous improvement and sustained growth. Under-nourished organisations where the budget is squeezed too hard can neither produce their best nor sustain their performance beyond the short-term and, given the likely decade-long post-Brexit recovery period which lies ahead, industry needs to be focused on building stamina.

It’s at times like this that senior management and shareholders need to understand the anatomy of the organisation.  Which are the strongest and most resilient parts? Where are the weak spots? How can resources be best deployed to build stamina?  Are all the vital organs functioning properly?  Arriving at the correct diagnosis at this stage is crucial for the long-term health of the business and, if Lean budget cuts are under consideration, it’s even more important to get it right.

During medical emergencies the need to invest in specialist help is obvious. Similarly, using qualified and experienced Lean practitioners can make the difference between rude health and terminal decline.  However, identifying the malaise is only the first step towards recovery; devising the right prescription and ensuring the treatment plan is followed through are where the hard work really begins, so having the correct guidance and resources in place really matter.

Belt tightening is an inevitable part of the economic cycle and in fact is a useful process to go through in many ways. Important lessons can be learned about working smarter and it can be the starting point for creating a leaner and more effective organisation. 

However, if you pull the cincture too hard and make your cuts back to the bone, eventually the company will be too weak to recover.  When the upturn comes – as indeed it will, sooner or later – make sure your Lean budget cuts haven’t squeezed the very lifeblood out of your business.

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