Modern cost management should be macro cost management including financial cost management, production cost management and organisational cost management.
Publications on financial cost management and production cost management have become very common and have their own unique features.
Make an argument: What is modern cost management?
Why do some companies tend to underperform? I think that in addition to the many reasons we are familiar with, there is probably another more important reason, which is that the organizational cost of this business is too large.
Therefore, the value of this organization is very small! In modern economic society, any organization, by its very nature, is an economic organization.
To maintain the existence of an economic organization and make it function properly, a certain cost must be paid, which is the organizational cost; And the size of this cost determines the value of the organization to a certain extent. Therefore, I believe that modern cost managementshould be a macro cost management including financial cost management, production cost management and organizational cost management.
Publications on financial cost management and production cost management have become very common and have their own unique features. Therefore, this article would like to talk about the status and role of organizational cost management in modern cost management.
It should be pointed out that the leaders of many of our enterprises, especially the decision-makers of enterprises, do not have enough or even no understanding of organizational costs.
Therefore, there can be no organizational cost management, let alone modern cost management.
Why is this the case?
Ask a question:
Organizational cost is a very important cost expenditure in the enterprise. It is related to the survival of the enterprise.
The reason why we do not know enough about organizational costs is probably mainly determined by the characteristics of organizational costs themselves. We know that there are narrow and broad meanings of costs. The so-called chivalrous cost mainly refers to financial costs and production costs. Financial costs and production costs can be measured in money or figures and can be reflected in the accounts.
However, in an enterprise, in addition to financial costs and production costs, there is also a cost, that is: hidden costs. Hidden costs are generally difficult to measure accurately and cannot be accurately reflected in the accounts. For example, the opportunity cost as we know it is a hidden cost. The economic cost is equal to the sum of the explicit and hidden costs.
It is not difficult to see that the organizational cost of a company is only a part of its economic cost, so it is naturally composed of explicit costs and hidden costs. The explicit costs in organizational costs mainly include management costs and workshop expenses; The composition of hidden costs in organizational costs is relatively complex and generally difficult to clearly understand.
For example:
- Opportunity cost of organization: Once an enterprise determines a certain form of organizational structure, it must abandon other forms of organizational structure, and it is very likely that there may be a form of better efficiency, higher efficiency and lower organizational cost in the abandoned organizational structure, or benefits Larger forms. That greater benefit is the opportunity cost of the existing organization.
- The organizational structure of the general enterprise must be divided into several departments and levels to coordinate and unify the work of these departments, which may have to pay a certain price.
- For the above reasons, a chain of command will inevitably be formed in the enterprise. Typically, this chain plays a role in favor of the business. However, sometimes it not only does not play a role in favoring enterprises, but also plays some adverse or even counterproductive effects. If so, I am afraid that it will also have to pay a considerable price.
- The wrong decision-making of the superior organization or the personal bad behavior of the manager sometimes directly cause certain adverse effects on the producer, so that the producer is depressed, resulting in a decline in the efficiency of the enterprise, and may also cause certain indirect losses.
- Because the market is ever-changing, and the organization of enterprises is relatively fixed, it may even show strong rigidity. Therefore, it is likely that the opportunity to win the market will be lost due to failure to adapt to changes in the market in time, resulting in the enterprise falling into trouble, and so on. All of this is probably a hidden and very important cost that a company usually does not pay much attention to. It should be pointed out that these hidden costs can sometimes inadvertently cause us immeasurable losses! Therefore, we say that whether it can be effectively managed is a matter of life and death for enterprises!
Explore two suggestions: Since organizational costs are so important, how can we reduce organizational costs for enterprises?
No matter how complex the composition of organizational costs, we can divide it into static and dynamic parts. Among them, the static part is the organizational cost determined by the structure of an organization itself, and it is likely that the organizational cost will be different due to the different organizational structure; The dynamic part of organizational cost refers to the fact that in the process of operation of an organization, the efficiency of the organization is different due to different mechanisms.
Therefore, in order to reduce organizational costs, it is necessary to start from two aspects: understanding and analyzing “organization”:
First of all, the static part of the organization is the structure of the organization, but also the hardware part of the organization; The dynamic part is the operating mechanism of the organization and the software part of the organization. Similarly, organizational costs are made up of dynamic and static parts, and their relationship is like that of actors and stage.
Generally speaking, after an organization is built (such as building a stage), its structure is difficult to change. Therefore, my first suggestion is: in order to reduce the cost of the organization, then the organization must hire a special consulting agency to carry out the organizational design before it is established, so as to be reasonable.
Design
Whether an organization is properly designed before it is established is critical. It should be pointed out that organizational design is precisely a weak link in India’s enterprises, especially small and medium-sized private enterprises. According to relevant information, in developed countries, enterprises, especially large enterprises, attach great importance to organizational design.
Before the establishment of an enterprise or the reform of the internal organization of the enterprise, it is generally necessary to hire a professional consulting agency to carry out organizational design. It may sound ridiculous to some people, but it is actually very normal.
It’s like we’re going to build a house, you always have to find someone to design it! You can’t always say what the cover looks like if you can’t dismantle it and change it! We always like to think of a company as a ship, employees to the crew, and the boss to the helmsman.
This is nothing more than to illustrate the truth:
As long as the boss is at the helm, as long as the employees work together. Then this ship will definitely be able to reach the other side of the victory!
However, we have just overlooked a very important issue. Which is the structural problem of this ship! If the ship is poorly designed, or not formally designed at all. But a ship that is being built, dismantled, and modified, let me ask:
Can such a ship withstand strong winds and waves?
If you really encounter strong winds and waves, I am afraid that even the best crew will be tired to death, and even the best helmsman will not be able to return to the sky! Therefore, we should try our best to eliminate the congenital deficiencies in the organizational structure of the enterprise!
Analysis
Second, while recognizing organizational costs, we must also analyze and understand labor costs. After the organizational structure of an enterprise is complete. Due to the different positions or positions of different people in the organization. His role in the enterprise will be different (such as actors, there are protagonists and supporting roles).
Hidden costs
Correspondingly, businesses pay different costs for employees of different statuses. Someone has made a calculation and said:
If this employee is an ordinary worker. The company’s expenses other than his salary are 1.5 times his salary. If he is a middle manager, it is 4-5 times, if he is a senior leader. It is 8 times or even more than 8 times!
All of these are still organizational costs that can be estimate. There are hidden costs that cannot be estimated, but are sure to occur.
The problem is that assuming that a person is very backward in thinking. If this person is an ordinary worker, his influence on the enterprise may not be too great. However, if he is a middle manager, his impact on the business is likely to be much greater!
Therefore, my second suggestion is:
In order to reduce organizational costs. It is necessary to achieve the optimal allocation of human resources in the organization. Match the quality of personnel with their positions. And give full play to the wisdom and talents of everyone!
In fact, everyone has his own strengths, and naturally there are also shortcomings and shortcomings. As a manager, his role is precisely to “observe the strengths of people. Use people’s strengths, gather people’s strengths, and show people’s strengths”!
If we can’t do that, then how can we reduce organizational costs?
Where are the qualities of managers reflected? Therefore, we advocate as a leader, you cannot understand technology, but you must not know how to use people!