By going back to basics, one company created a blueprint for saving boatloads of cash
Three years ago the management of Hi-Shear Technology, a $20-million aerospace subcontractor in Torrance, Calif., thought the next recession was just about to hit. Federal funding for military and space programs was running low, and customers had begun delaying orders. Cash flow became a problem.
So company executive Linda Nespole devised a cost-control blueprint to quickly bolster Hi-Shear's bottom line. She started by examining a year's worth of Hi-Shear's utility bills. Water costs, she saw, had increased 50%; gas and electricity were rising each month, too. Those increases clued Nespole in to leaky pipes and inefficient lights. Basic repairs and adjustments lowered the water and gas bills immediately, and new lighting paid for itself in six months.
Nespole then applied that simple discipline -- charting expenses and acting on her findings -- to other operational costs. The result? In addition to switching its long-distance telephone service and its provider of several insurance policies, Hi-Shear cut its 401(k) costs by 30% -- just by threatening to switch its plan provider. "They have no incentive to reduce costs unless you threaten to leave them," Nespole says.
Though it took a cash crunch to initiate the cost-cutting procedures, the effectiveness of the measures made saving money a priority for all 125 employees. The maintenance staff tracks meters every day. Administrators review utility bills quarterly, and Nespole comparison shops for all insurance policies annually, even calling human-resources directors at other companies to ask about their providers. Janitors shut down air conditioners at night and have stopped heating such areas as storage. And utility monitoring caught the spike in the water bill -- $1,500 in a quarter -- in its early stages.
Although many businesses these days are paying outside consultants like utility or telecommunications auditors to help control costs, Nespole has shown that the time required to find such specialists might be better spent evaluating a business's current service providers. "It's very easy," she says. "You just have to make the time."
This article was adapted from material that first appeared in Inc. magazine October 1999.