Eight Percent

Every cost programme announces a percentage, and six months later the percentage is real. Walk the building at seven in the evening and see whether the work went with it.

The canteen is closed and the chairs are up, which is what a building looks like when a cost programme has worked. Through the doorway two people are still at a machine, and they were there last Tuesday as well. Nothing about this is dramatic. The line came out of the budget, the headcount came out of the plan, and the demand those people were serving stayed exactly where it was.

A cost-out removes a resource. It does not remove the reason the resource existed, and the reason does not announce itself — it reappears quietly wherever there is no line item watching. Overtime. Expediting. A favour from a supplier that will be repaid on price next year. Each of those has a different owner and a different budget, which is precisely why the saving survives every review it is put through.

The bill is real and it is split. The saving sits in one budget and the cost sits in two others, and nobody holds both. At a site I took over, the previous year’s reduction was still being paid for in a premium freight account that reported to a different director.

So a cost programme is worth one question twelve months later, and it is not whether the percentage held: which budget did the work move into, and does one person see both? A saving that only one budget can see has not been made. It has been moved.

Where this shows up: Production turnaround — recovering delivery, quality and cost.