The triumph of tiny tangibles

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Tiny tangibles that worked

It’s what’s small that counts. Ignoring small cost-benefit payoffs–from fractions of a person’s time to cents off an average purchase–can rob you of savings. Why, you ask, can’t I convince management that saving one minute per hour for each of 60 workers is as valuable as saving the entire work day of one person?

It could be because your execs don’t appreciate how tiny can be terrific when you’re looking to justify systems investments. Here are four ways to open their eyes:

Tell tales of winning from wee changes:

Learn to listen when Tiny Tangible Opportunities knock on your door. You can hear these taps quite often from large groups of professional people who process critical transactions.

Suggest some everyday occurrences to your executives to get them thinking about the impact of tiny differences. For example, placing first in the Indianapolis 500 by 3 seconds over the next fastest car brought an extra $900,000 to race driver Eddie Cheever, Jr. in 1998.

In the systems realm, small changes can have big effects. For example, if you shave 4 seconds from each of 1,000 daily help-desk calls averaging 1 minute each, you’ll be able to handle more than 60 additional calls with no increase in staff or equipment.

Leave it to Steve Jobs to take this “tiny is terrific” concept to a dramatic extreme. Andy Hertzfeld, a designer on the Macintosh development team, tells the story in Bob Cringeley’s PBS TV documentary “Triumph of the Nerds.” During Apple Computer Inc.’s race to get the Mac to market, Jobs felt the computer’s boot-up time was too long. His developers disagreed. Demanding that they shave five seconds from every boot up, Jobs exclaimed they would save 50 lives with their efforts. (Jobs had his math about right: A person lives approximately 31.5 million seconds in a year. One million Mac owners, booting up an average of once per day, would save 1.825 billion seconds per year, which comes out to 58 lifetimes.) Thus, socially inspired, the development team came through.

Spot the coveted TTOs!:

Learn to listen when Tiny Tangible Opportunities (TTOs) knock on your door. You can hear these taps quite often from large groups of professional people who process critical transactions. Such groups typically have difficult-to-recruit professional skills and high turnover, and they require costly training. These functions are especially ripe: help desks, customer inquiry centers, order processing, and engineering design departments. Look for enticing TTOs in reductions of error rates, declines in data chasing (“Now where in the world is that piece of info?”), and decreases in the cost of materials.

Draw out cost-saving scenarios:

The secret to constructing powerful ROI calculations from tiny tangibles is to examine the process and its internal and external effects. For example, while a normal transaction costs a dollar, the cost of fixing a misprocessed transaction can easily exceed $10. Externally, avoiding errors means keeping customers happy (thus enticing them to buy more products, Ms. VP of Sales) and lowering the frustration level of employees (thus reducing turnover, Mr. Director of HR).

Continuing with your tantalizing reasoning, you point out that declines in data chasing can boost labor efficiency and improve services to customers. Materials cost reductions go directly to the department’s bottom line and create economic advantages to that process’s customers. For example, if your firm finds a way to cut costs for a key part, your customer–say, a manufacturer–can lower the price to customers. He may then be able to increase volume and order more parts from you.

Tiny tangibles that worked

	For a national trucking firm, cutting driver turnover resulted in a 50% increase in profits.
	Improving broker retention by 10% increased the broker’s value to the stock brokerage by +155%.
	At a national auto services chain, stores that were in the top third for employee retention also had 22% higher sales per employee.

Source: “The Loyalty Effect” by Frederick F. Reichheld (Harvard Business School Press, 1996)

Smash the myth that labor seconds don’t count: Often execs argue that saving a person’s time doesn’t count in a business case unless that entire job is permanently eliminated. But small productivity gains can translate into real savings if the cumulative effect allows you to trim jobs through attrition. This opportunity is big because, on average, U.S. corporations experience a sizable 25% annual employee turnover, according to Frederick F. Reichheld’s book “The Loyalty Effect” (Harvard Business School Press, 1996).

That’s a very tangible cost avoidance favoring your proposed project.

Execs are paid the big bucks because they can see the big picture. But that skill can blind them to the large value of very small individual improvements. Open their eyes, and tiny tangibles can be a triumph for them and for you. //

Have any interesting experiences extracting major money from itsy-bitsy improvements? Enlighten me at jkeen@decidingfactor.com.

Jack M. Keen is founder and president of The Deciding Factor, a Basking Ridge, N.J.-based international consulting firm (www.decidingfactor.com) specializing in the development of ROI models, tools, best practices, and workshops for building better business cases faster. A frequent guest speaker, Keen has advised more than 100 organizations in 15 countries.