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Keep the Unintended Consequences in Mind When Cutting Costs
June 24, 2009 -
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In today’s economy, the pressure to cut costs is intense. But cost cutting moves can backfire if consequences aren’t carefully evaluated.
Value engineering is a prime example. Changes made to reduce construction costs can increase other costs. Buying windows that are less energy efficient, for example, will not only raise energy costs, but also push the HVAC system perilously close to capacity on design days.
Higher energy prices aren’t the only risk. Design changes can affect compliance with fire safety code or inadvertently compromise security.
In a worst case, a move to cut costs could actually cost a company business. In one case, a financial firm identified a new location that had lower rental rates and was closer to home for most employees. It came close to signing the new lease, but eventually decided to stay where it was. The reason: The current location was very close to a major customer, one that was likely to be a significant source of new business in the future. The real estate savings were no reason to risk that opportunity.
It’s important to solicit input from all parties that will be affected by cost cutting moves. Doing that makes cost cutting more difficult – the parties affected are likely to put up at least a little bit of a battle – but it can save money in the long term.