• Sam Decker

To CEOs Cutting Budgets: “Cheap is Expensive”

What a dilemma!


You’ve been reading (perhaps experiencing) about recent company layoffs.  I’m guessing most companies are making lay off decision based on roles the business needs, but also employee performance.  It would seem obvious that every company wants to keep their best people. Although I’ve heard of companies that offer voluntary attrition with a healthy severance package. You know who takes that package? The best employees. What’s left at that company? Well…fewer of those best employees. Again, the quality of your inside is visible to your outside. The quality of a company is a function of the quality of people it keeps.

At Bazaarvoice, we go to great lengths to hire the best employees, and it has made a significant difference to our performance, which is a function of the performance we deliver for our clients. But imagine if we didn’t hire the best. Imagine if we hired the cheapest  employees, or had no discipline in our hiring process. We’d probably get those desperate for a job. They could be half as good in execution, poor strategic skills, and lack integrity. What kind of company would we be? More importantly, how effective would we be for our clients? We’d be as effective as if they had hired those employees. We – and most of your marketing vendors/agencies — are an extension of our client’s team. I don’t see much difference in the quality of results a client gets from a top performing agency or vendor and top performing employee.

I was talking to an executive from P&G the other night about agencies. Many times, as an agency grows and becomes more ‘homogeneous’ the best designers no longer want to work there. The best designers want to work where they can do great work. Where it is demanded they do great work. But there’s a natural ‘circle of life’ for companies who fail to focus on being the best. Companies that find themselves in the dangerous ‘middle’ of a market spiral down in performance, and eventually fail to make room for those that do great work. For the sake of your company, the worst thing is to travel down the middle to mediocrity in tough times. It’s like multiplying bad times bad. I’m not a math genius, but that equals “suck”.

My frugal friends at Ice.com (run by the Gniwisch brothers) told me their wise mother’s saying: “Cheap is expensive”.  Though I didn’t ask Mrs. Gniwish, I think it means if you buy a cheap product/service, you pay for it in many other ways. You could pay for it in having to do things yourself, rework projects, or lack results from mediocrity. “You get what you pay for” was not invented by the Gniwisch family, but I think it’s just as salient in this argument.

I saw the perils of commoditizing capabilities myself in launching over 100 features & functionalities on Dell.com. Many times, because we time boxed our development, we had to cut important features or design elements from a project.  While we may have technically launched the project, we didn’t really achieve the full vision or ROI from the project. For example, when we launched the couponing capability – though it ‘launched’ – it lacked important business process capabilities. As a result, the functionality didn’t get used for months until we could phase in the lost features. We knew what performance we needed from a functionality, but didn’t get it because we afforded (time box) lesser capabilities. The answer should be to build the best of the highest impacting functionalities, and drop other projects.

Similarly, in times like this, the opportunity is to focus the organization on the most important things. And those important things should have high performance characteristics. This doesn’t mean to get the ‘luxury’ equivalent of people and partners, but rather the ‘value’ of high performance. Get the best performing people and agencies on the strategies that are most critical to your current and future performance. Think about prioritizing initiatives that have the highest net present value, where benefits scale and the evolution of a program grows annuity of benefits throughout the organization. If you commoditize or cut anything, it is those things that are furthest away from customer-facing and culture-impacting. At a time of high customer distrust and considered purchase decisions, now is the time to double down on investments customer centricity and word of mouth. Operationalize the voice of the customer, bringing ‘customer oxygen’ throughout the functions. Keep or build programs that automate and scale to maximize return and leverage precious, high-performing employees’ time. 

Don’t multiply bad times bad performance. No one wants to suck. The final analysis of your performance is whether you were the best you could be in the worst of times.

#budgeting #finances #agencies #vendors #scaling #budgetcuts #wordofmouth #Bazaarvoice #priorities #NPV #customeroxygen