Dave Trott: On the other hand

Joe Stegner had often been asked to make recommendations to the board on profitability.

There are usually two ways to increase profitability: raise income or cut costs.

Joe Stegner worked with numbers.

He saw an obvious and simple way to cut costs that could save many millions of dollars.

The company had lots of factories that bought their own supplies.

They negotiated their own prices.

But the negotiations differed from factory to factory.

It was a waste of time and money for everyone to do separate deals.

Stegner had tried presenting this argument to the board before.

Usually they saw his presentation and nodded along with it.

Then nothing happened.

It was presented as slides of abstract numbers.

Very logical, very sensible, very reasonable.

And that was the problem, it appealed to the wrong side of the brain.

The reasonable side of the brain likes to put things on the back burner while it thinks about them.

And company-wide savings on every purchase seemed like something that needed a lot of consideration.

So nothing happened.

Joe Stegner realised he had to talk to the other side of the brain.

The emotional part, that feels it rather than thinks about it.

So he chose just one item.

One of the things each factory was purchasing was work gloves.

Dozens of different factories meant dozens of different prices.

So Joe Stegner briefed an intern to buy a pair of each of the work gloves that the factories purchased.

That made four hundred and twenty four different pairs of gloves.

Then he got the intern to put the price tag on each pair.

Then he waited for the next board meeting.

Before it started he took all the gloves and placed them in a huge pile on the table.

So when the board members filed what they saw was the polished boardroom table with a massive pile of work gloves in the middle.

Of course they asked, "What the hell are these?"

And Joe Stegner explained the problem.

The board members began picking up and examining the gloves.

They all looked identical but some had $3.22 price stickers, some had $5.00, some had $10.55, and some had $17.00 on them.

The board members looked at each other.

This was crazy, who the hell was paying $17.00 for gloves that could be bought for $3.22?

Why wasn’t someone in charge of this?

If this madness was happening over work gloves, imagine what else it was happening on.

The company must be haemorrhaging money on this wastefulness.

And the board members immediately agreed to centralise buying and negotiations across standardised deals.

The same four hundred and twenty four gloves were taken to every factory to explain what was happening and why it must change.

Buying across all commodities was centralised.

In their book "The Heart of Change" Kotter and Cohen explain how profits increased massively because costs were slashed.

Costs were slashed because it wasn’t just abstract board members looking at abstract numbers.

It was human beings looking at simple, everyday objects.

We can learn a lot about communication from that.

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