Make Sure You Know Better --Dickeson

I know of only one production manager, at a printing company using a cost accounting system, who doesn't believe that increasing efficiency reduces his costs. How do I know this? I've spoken to him several times about the deceptions of cost accounting.

He didn't learn the truth from the company that supplied the computerized cost system they have. Those guys believe it, too. I think they know better, but they couldn't sell a system to a printing company that didn't have a set of cost rates in it. Well, maybe they don't know better. I may have spoken too quickly.

He didn't learn the truth at meetings of his trade association. Those guys really believe that increased efficiency reduces costs, too. I think they know better, but they couldn't get printers to come to meetings if they spoke the truth. Maybe they've just become confused.

Again, I may have spoken too soon.

Searching for the Truth

He didn't learn the truth from most printing consultants or from all of the printing equipment salesmen. The plain fact is that these guys really don't know any better. Maybe they really know the truth, but it's not in their selfish interest to say so.

The bean counters, the accountants at printing companies, know the facts. They've tried, they're trying, to get us to learn the truth about our "cost" systems. Trouble is, they're not the ones out on the manufacturing floor—not out in the trenches—where decisions are being made every minute and every hour. They know that efficiency of operation never reduced a true cost of the company, never increased profitability a nickel! But still they support cost accounting systems that deceive us, the guys on the floor and, often, top management.

They try to tell people that the cost accounting system is just a convenient fiction—but nobody hears them. "You guys saying our costs aren't really our costs? Come on, buddy-boy, you kidding us? Whom are we supposed to believe?"

Reducing headcount (or firing people, as Donald Trump says) is truly the way increased efficiency can reduce real costs. But firing trained, skillful, knowledgeable people who've improved our efficiency to the point it makes their job redundant is a helluva way to reduce costs! It's deadly. That's the awful truth of the matter. Disagree? Do you have a better way of reducing real out-of-pocket costs? Tell us about it.

Painful as it may be, there is another way that improved efficiency can increase the profitability of the company without sacrificing jobs, isn't there? It's by increasing sales volume to occupy the time made available from improved efficiency. "Easy," said the owl to the centipede, "just turn yourself into a dog and then you'll only have four aching feet instead of a hundred." "Wait a minute. How do I turn myself into a dog, oh wise owl?" And, how do I increase my sales volume in rhythm with my productivity increases?

I said it was painful. Read Harris DeWese, in the adjoining column, about increasing your sales. He's our wise owl.

Yes, Harris, there are lots of ways to increase sales volume, along with getting out there and selling something. There's the offer that can't be refused; personal relationship selling; persistence; finding out the prospect's real needs; meeting objections. There are dozens of techniques. Many, if not most of them, involve taking a job from another printer—stealing market share. That's not a comfortable thing for a columnist addressing all printers in the industry to say, is it? You handle that hot potato, Brother DeWese.

"Most people ignore most systems most of the time," says pundit Gary North. Job cost is a system that's supposed to tell us the cost of a job. But we find ourselves ignoring most job costs most of the time, don't we? Isn't that why I find such puzzled looks on the faces of job cost computer suppliers? We're spending a ton of money for their computer systems and then we proceed to ignore them. It's not because we want to do that after spending all that money. It's because we're suffering from some mass hypnosis about the virtues of unusable systems.

Job Cost Questions

Ask yourself: Why haven't the Japanese ever resorted to job cost systems? How are the thousands of printing companies that don't use, or even consider, job cost systems able to survive? How is the largest company-supplier of printing on planet earth getting along without a company-wide system for finding out its job costs? Is it because they're ignoring most job cost systems most of the time? I think so.

I think we're ignoring most of those job cost systems most of the time because we're reluctant to face the truth. Reducing job costs nets you nothing. The truth is that you must reduce headcount as you increase efficiency in order to increase net revenues. Either that or you must fill your time-capacity with new sales as you increase your efficiency.

As always, you're caught between a rock and a hard place with nowhere to turn and hide. And you wanted to be an entrepreneur!

Meanwhile, our production manager knows that he must cut his headcount as he asks the same people he may later be forced to let go to find new routes to efficiency. Either that or he must encourage the sales department to bring in more work (steal market share) priced to bring in a good profit. Or some of both. Either way, it's not a happy choice—but a necessary one.

Let's just tell folks the truth, fellow bean counters. We'd like to make enough money to see our company among the survivors in printing. We're not getting the truth from our supplier of fancy job cost systems, manufacturers of equipment, our consultants or trade associations. The truth will set us free...or so they say.

—Roger V. Dickeson

About the Author

Roger Dickeson is a printing productivity consultant based in Sylmar, CA. He can be reached via e-mail: rogervd@verizon.net.