Cost containment

Poorly skilled worker will cost your company

No doubt every business in the world is trying to increase profit and cut costs. Cutting costs and improving productivity is what CEOs and managers get paid to do.

In my traveling and working with various businesses around the world, I have seen this killer mistake over and over again “Businesses hire low-skilled workers to save money.” In my current job, I am working in the country of Qatar, in the city of Doha; I am having some serious performance issues with some of my employees.

The policy of my company is to hire low skilled workers so the company doesn’t have to pay high salaries. This policy has no wisdom in it or any sign of long term planing. As a manager, I am trying to change this policy, which is not an easy task. My job is to work with more important issues than to tell my employees how to perform their day to day job, but some of my employees need constant supervision and I can not take the risk of them not doing their job well.

Living in this part of the world for almost a year now, I have noticed that it’s the general policy of most of the countries in this region to depend on low skilled workers for most of their labor needs. This policy led millions of talented workers to leave these countries and migrate looking for better wages which left these countries with a large pool of low skilled workers who actually don’t have the right skills and experience that these countries need for its ambitious development plans.

When you hire a new worker, look for quality of work first than look to save money, the quality work produced by competent worker will save you the money you will otherwise have to spend in training and supervising low skilled and low paid workers.

Pay to get the best employees

One of the greatest challenges that face small businesses and sometimes even the larger corporate world is unskilled or under qualified labor force.

I have worked and visited few countries in the past 12 months from the US to India to Saudi Arabia to Qatar. As a young graduate, I started my career with a small company in TX, USA, most of the labor force of that company consisted of young graduates with very limited experience. The company strategy was, as most small businesses do, is to hire young workers or workers with limited experience to cut costs. The end results were disastrous, the company was not able to carry on with its obligations, many deliverables didn’t meet client expectations and most projects ran over budget and the end result was “a bankrupted company.”

What made me write about this subject is my current experience. Right now I am working in the Area between Saudi Arabia, Dubai and Qatar, this area known locally by “The Arabian Gulf.” Because of the rising oil prices, governments here are spending billions of dollars in all areas of developments, which is great, but most projects depends heavily on cheap labor brought in from South Asia. As I live in this area, I see why the development over the past 20-30 years has been slow although billions of dollars were spent on thousands of projects, the main reason for that is the total dependency on cheap labor, most projects were not executed properly because of lake of experience, many projects were done over and over.

The management tip here is “don’t really on cheap labor; it will cost you down the road.”

Rising Oil prices and cost management

The continues hike in oil prices is not going to stop anytime soon, if your business is directly affected by oil price fluctuations, it would be a wise decision to plan your budget around higher oil prices.

Many businesses, especially small businesses, may psychologically, get affected by hearing the news of higher oil prices and start to worry about their bottom line.

But as a business you got to look at your numbers. As a consultant who uses the internet and the phones extensively in his work, I saw a sharp decline in my communications bill, from almost $1000 a month to below $100 a month, that’s 90% decrease in cost.

This is only one example of how costs are dropping for other services. Having your employees work remotely from home is another example of cost saving method you can utilize, by having your employees work from home, you can cut on many types of costs associated with the office environment such as (office rent, utilities bills, commuting time, etc.)

The costs of few commodities may be rising, but the overall cost of doing business is dropping.

Reduce costs…take an inventory of your business

It’s amazing how much money a business can save by taking a detailed inventory of the business. By taking a detailed inventory I mean analyzing each aspect of doing business.

Areas where you can save money and reduce costs:
1-Employees job performance and job description reviews: having a regular meeting with employees to go over job performance and day to day activities will reveal so much to a manger, you will find what actually people doing at your company, you may think you know your employees well, but having short timely meeting with your employees will reveal to you areas which are usually overlooked in today’s dynamic work environment. You will find employees who are not doing what they were hired to do, you will find the same job done by several people, you will find abuses of company resources.
2-Renegotiate contracts with supplier and service providers: you will be surprised by how much you could save by renegotiating an old service contract. Many contracts never get regular review by management, by reviewing and renegotiating contracts on regular basis, the company could save a bundle.
3-Find cost generating areas in your company: have an intense regular review of your over all operation and watch for cost generating areas, even small cost cuts will add to savings, look for hidden areas that are usually overlooked such as (office supplies and utilities bills.)

The list can go on and on, but the general idea is to have a regular review of business operation to find areas where costs could be cut or reduced.