The Moneyball Effect

I’m sure most of you in the support and service industry have heard that you are in fact a cost center to the business and therefore you might as well grovel for your existence. You should feel grateful for the opportunity to service the business and receive an income even though you bleed money. To be clear, this is total crapola, madness, this is Sparta and you are lucky I don’t send you flying off a cliff.

The fact that you have an operational company with which you can generate income means what….nothing? You have to spend money to make money. It’s called the moneyball effect. Spend the money to get your team to the place where the resources will allow you, work to build a competitive base before moving on to other aspects of the business.

i.e. As per the WIKI link

Although not always demonstrably profitable, a cost center typically adds to revenue indirectly or fulfils some other corporate mandate. Money spent on research and development, for example, may yield innovations that will be profitable in the future. Investments in public relations and customer service may result in more customers and increased customer loyalty.

Stop playing the cost center card and cutting costs there just because you know that’s where the bleed is. It’s demotivating, irritating and frankly annoying when people in these departments work tirelessly to bring costs down year on year end even though the company experiences growth. Instead try to do something logical…um…maybe develop a metric system that calculates the value contributed by your cost centers before you lay waste to the sanity and mental health of the staff therein.

Just throwing a couple of suggestions out there. Maybe take the following in to consideration and develop some form of a metric to measure against it:

  • Cost of interruption of service to the business: Estimated loss of income per hour should the business not have resourcing, is there sufficient equipment or processes in place to manage it.
  • Service levels: What kind of service levels should be maintained to make sure the business can operate efficiently, are they being met?
  • Time To Resolve: How long it takes to meet or resolve a service request or issue in the business. What’s the cost impact of the delay?

The bottom line is this. Yes, cost centers are expensive. They drain the business of money but they are required to make a business run and run well. It’s not easy to justify costs or find ways to measure the metrics of value or financial impact of the services offered by these cost centers, but it’s possible. Think before you act and have valid information to work with when making decisions that could impact the entire business and people that help run it.

You’d be surprised how logical people can be when information is provided that justifies reasonable measures against valid metrics. If you don’t understand that, then you shouldn’t be running a business. #justsaying


2 thoughts on “The Moneyball Effect

  1. Well, as you know I was in the IT business for 28 years……

    Erm, so what else is new, with regards to this problem you blog about, nothing has changed, nothing probably will.

    That is business, that is economics, that is life.

    Don’t get me wrong, I was just as frustrated as you about this particular dillema, especially the consant mantra “We must do more with less”, yeah right, well let’s start with directors salary cuts, no performace=no bonuses, less “generous” share allocations, lead by example and maybe the troops will follow, just a suggestion !!!!

    Yes you can, if {insert company/parastatal name here) is bloated, overstaffed, inefficient, poorly managed or delivers lousy service / goods, by all means improve effiency, reduce costs, but understand, you WILL reach a point somewhere along the line where you CANNOT do more for less. That is where smart management, clever innovations, new developments, bite the bullet attitude and just a wee bit of good fortune comes in.

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