A simple little system
By going back to basics, one company created a blueprint for saving boatloads of cash
BY ILAN MOCHARI
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."
They don't call it a Web browser for nothing. According to a recent survey of 25 top E-commerce sites, conducted by Net Effect Systems, 67% of the merchandise that customers "select" on-line is never actually purchased. Here's how those sites' responses to other survey questions came out:
Of the people who visit your site, how many actually make a purchase or become customers?
How many people who make a purchase actually purchase again?
Fewer than 10%
How do you position your E-commerce site against your competitors'?
Service/customer experience: 65%
Selection of goods: 20%
Do you have a Web-based customer-management system?
Do you have a method for finding out why customers leave the Web site before making a purchase?
Not sure: 10%
Is the responsibility for E-commerce customer experience (service and support) a full-time executive-level position?
We're considering it: 5%
Source: First Annual Survey on Ecommerce Service, June 1999, Net Effect Systems, N. Hollywood, Calif.
Steve and Andi Rosenstein couldn't get a bank loan when they first started Fitigues Inc., now a $28-million casual-clothing business, in Chicago. So in 1988 they began to cultivate a relationship with a local banker. The Rosensteins deposited $500 in a checking account at Chicago's LaSalle Bank. They then struck up a relationship with their account officer, who introduced them to a lending officer. Every year, the Rosensteins would ask to sit down with a lending officer. Finally, four years later, LaSalle gave them their first line of credit. Fitigues still banks with LaSalle. "They give us everything we ask for," says Steve Rosenstein. --Christopher Caggiano
Is the Americans with Disabilities Act driving you crazy? Take heart. Recent U.S. Supreme Court decisions have considerably narrowed the ADA's coverage, specifically regarding disabilities such as hearing and vision problems, high blood pressure, and diabetes, all of which can be alleviated by proper treatment. According to lawyer Andrew J. Sherman of Katten Muchin & Zavis, in Washington, D.C., the recent rulings raise the standard on what constitutes a genuine disability. "This forces the question, Is there a readily available solution to mitigate the alleged disability?" he says. "If the answer is yes, then the disability probably isn't protected." --C.C.