The
Power of Multiplication
by Tom Pryor
In February 2000, Southwest Airlines' CEO Herb Kelleher sent a cost improvement request to the home of each of the company's 30,000 employees. In the letter, he told them "Our profitability is in jeopardy" due to the rising cost of jet fuel. In a personal plea, Herb asked each employee to help out by saving $5.00 per day. That would, he explained, more than offset the uncontrollable rise in fuel prices. A mere $5.00 per day multiplied by 30,000 employees and 365 days per year would result in more than $50 million in cost improvement. Six weeks after the letter was mailed, the company had saved over $2 million!
Is your organization confronted with rising costs or shrinking profits? Do you need action plans to eliminate waste or optimize value? All too often, managers incorrectly assume:
- It is my responsibility to come up with the idea to improve cost.
- I need a big idea to match our big need.
- Cost reduction needs to be kept a secret to be a success.
Openly communicating the need for cost improvement and asking for everyone's participation can produce big results. Here are three examples:
-
Navistar uses Activity Based Management (ABM) and Six Sigma Black Belt trainers
to get all employees involved in their process improvement program. Individuals
begin as a Green Belt. More experienced Master Black Belts train and mentor Green
Belts how to use ABM to improve and measure process improvements. After participating
in several successful cost improvement projects, employees become Black Belts
or Masters. Navistar employees have implemented hundreds of improvement projects
at an average savings of $200,000. General Electric and Honeywell (formerly Allied
Signal) have similar Black Belt programs where employees train other employees
how to reduce costs.
- Sometimes
you have to give to get. The May/June 2000 issue of Life@Work
magazine explains how Pastor Andy Stanley of North
Point Community Church in suburban Atlanta created a spirit of stewardship
and involvement in his congregation. The church gave envelopes containing a $5,
$10 or $20 bill to 6,000 people during a Sunday morning service. The money came
with three stipulations:
-
Everyone had to invest the money, adding to it if they chose, in God's work outside
the
walls of the church; - They could not keep the funds, but they could pool it with others if they desired; and,
- They were not to give the money to the first street person they encountered. Be creative.
Pastor Stanley got thousands of letters back from church members explaining what they were able to accomplish with the small amounts of cash. Stanley estimated that the $37,000 "seed" capital multiplied into more than $300,000 given for various needs.
-
Everyone had to invest the money, adding to it if they chose, in God's work outside
the
-
In Pryor Convictions: 31 Insights into ABM, I explain the power of ABM multiplication that several ICMS clients are using. For example, if you implement ABM in 1 department, focus on 1 activity for improvement, define 1 action plan worth $1,000 per month that is implemented for 1 month you will save $1,000. Not bad, but if you increase each 1 to a 2, you will multiply your savings to $32,000. And if you make it 4, you can save over $1 million dollars!
SPECIAL
OFFER:
In the spirit of multiplication and to increase the number
of organizations experiencing the many benefits of ABM, ICMS is offering til the
end of May 2000 THREE FREE COPIES of our CMS-PC
Software.
To earn FREE SOFTWARE:
- Send an e-mail to tompryor@icms.net explaining why you and your organization deserves and needs one of the three software licenses, valued at $3,495.00 each. Be truthful, but creative with your request.
- E-Mails must be received by May 31, 2000.
- The ICMS staff will vote to determine the top 3 requests. Winners will be notified and names will be posted June 1st, 2000 on www.ICMS.net.
- If you accept the free software, you agree to provide ICMS a one-page summary of your implementation by August 31, 2000. No confidential information is necessary in the summary.
- Hurry! Send us your E-Mail today!
If you have any questions or comments about this article, please e-mail TomPryor@icms.net today!
Send comments about this article to Tom Pryor at TomPryor@icms.net. Or, call ICMS to talk to someone about your ABM needs... (817) 483-6511.
If this article has inspired you and your organization to cut costs this year, call us at 817-475-2945, or e-mail your needs to tompryor@icms.net.
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