Early in my working life, I saw that “traditional” approaches to cutting costs usually didn’t work. My micro-level experiences may be valid at a macro level.
One cost-cutting story comes from my time as a temp, at a cheap (and I don’t mean frugal) outfit that made huge sums in investment banking. The bankers usually got high salaries, with bonuses in seven digits, but they were ill-tempered and always conscious of the costs of their temps.
The going rate for skilled Manhattan computer jockeys was around $16-$22 per hour, if you could type at least 80 words per minute with minimal errors, and be skilled at Word for DOS, which everyone seemed to use though Windows had been out for a long time and our printers were often Apple LaserWriters. We invariably made two-or-three column horizontal pages with proportional type, on computers that had no graphics; our job was to type and lay out handwritten words or photocopied sections from books.
Nearly all the temps I worked with were graduate students or hopeful artists/writers/actors, and over half were men. Most of us worked 20-50 hours per week despite our “primary” careers. There are a lot of people who want to be professional artists and actors, and few who do; and a never ending supply of graduate students.
The bankers, for their part, would wine and dine their clients (often chief executives of large companies), spend an hour or two picking merger or acquisition targets based on their libraries of financial news, and then spend around 12 to 18 hours writing up their ideas on why companies should merge, a move 80% likely to fail. If you ever wondered how Chrysler ended up with Gulfstream, now you know. I’m sure they did more in the period following the pairing, since they ended up with $8 – $20 million from a typical deal.
This company made the most of its clerics by having an overnight typing pool, sent home one by one as the work tailed off. (One competitor, who I worked for more often, devoted one temp to each banker, which got them the best talent and immediate results).
One day, one of the investment bankers came in, yelled, “There have been too many f****** calls from you b******s,” tore the data-terminal/phone from the wall, and threw it into the trash.
There was silence in his wake.
I had rarely seen that phone picked up, and usually it was for people to call in and tell someone they’d be late, or, more often, to order dinner; some of them had started work at 9 am and kept on going into the late hours. The company, by then, had stopped paying for dinner to be brought in.
It was fascinating to see the response to that trashed phone, which most likely cost more in hardware than all the phone calls we could make in a year. We were in a mostly empty building, generally by ourselves, with the odd investment banker in their office, door closed (I don’t blame them, a huge building with an open floor plan — except the wall offices — is spooky and lonely at night, empty, half the lights off.)
When one has a seven figure salary and whines about a few minutes a night of phone calls, it’s bad enough; cursing out one’s skilled workers over trifles is foolish at any time; and causing more damage in a temper tantrum than the costs one is seeking to “control,” well, that’ll bring consequences.
After that, some of the temps chose to say “no” to their agency, going to other customers instead. People didn’t work as hard. A game appeared — “who can make the most expensive overseas calls?” They’d torn out or phone but left us practically alone on an entire floor of open offices with unlocked phones. I’d be pretty sure that the investment bankers had much higher phone bills, overall, in the next week than they’d had all year, but now it was showing up as coming from the offices of people whose “costs” weren’t “controlled.”
What was the point of this? If the costs were really an issue, a brief chat probably would have helped, or just quietly having the phone removed by a technician. The executive in question no doubt thought he was cutting costs; in reality, he was raising them.
On a lower level:
I started out at a semi-fast-food-steakhouse, the kind that no longer seems to exist in most of the country — mine was a Rustler, but it was similar to Sizzler, Ponderosa, Western Sizzlin’, and probably others. After a few months, central management (a few states away) decided that they were spending too much on plates and forks and such, and so every store got a new dictate.
The managers gathered us together, and told us that from here on, any time we accidentally broke a plate, or let a fork or some such slip into the trash while cleaning, (which happened, though not often, given the methods we used and the speed we worked at), it would be docked from our schedule. Not our pay, which would be illegal, but our schedule.
At the time we made $3.35 an hour (some long-terms made $3.40 or even, gosh, $3.45). The cost of a plate was around $3, as I recall. Forks and spoons cost 3¢ and knives cost 5¢. At that point, I only rarely had heard the crash of a plate and almost never saw silverware in the bin.
Marc, our full-time dishwasher — a hard worker — listened, and then went into the kitchen, took a rack of plates, and let them drop, one by one, onto the floor. The managers exchanged looks but didn’t stop him. After what seemed like a very long time, they went in, spoke quietly, and cut his schedule.
They needed a dishwasher, so every time Marc showed up, he was asked to work longer hours anyway. I began to notice more silverware in the garbage (not from me!). Minimum wage really wasn’t enough to get people rooting through other people’s leftovers for 3¢ forks. Then boxes of knives went missing. Lots of them.
We later had to take out the A-1 sauce (surprisingly heavily used), which the customers were stealing, replacing it with “Rustler steak sauce.” The customers did not react well to this, and we started to have shorter lines and more empty tables.
Marc was the first out, moving three doors down, making $2 an hour more, and getting free meals. That started the rest of us looking, and my brief career in the restaurant industry ended — hopefully forever — a few months later. I, too, got another $2 per hour – plus commissions, and no smell of grease, selling shoes across the street.
There was no effort in either case to involve anyone but executives in cost cutting. Most of the Rustler people worked there because we were still in high school or college, not because we were morons. Were we criminals or an untapped resource? I wonder if the Rustler chain would still be around if they’d thought about the second possibility.