Employee Suggestion Programs Can Pump Up Your Bottom Line

You can't open a newspaper or turn on the TV without being bombarded with reports on the dismal state of the economy. Record high oil prices are having a devastating impact and driving up the price of everything from a gallon of gas to a gallon of milk. Home foreclosures are at an all-time high. Unemployment rates are rising. The stock market is up one day, down the next.

In the face of such uncertainty it is critical that businesses to look for ways to cut costs and eliminate waste. No longer can they simply raise prices to remain financially stable. Successful companies understand the strategy of constantly looking for ways to save money in order to control costs. Unfortunately, most companies simply eliminate people; they would do much better to eliminate waste.

Management can begin that process by asking employees for their suggestions. They see on a daily basis the wastes in time, procedures and materials that can be eliminated. The problem at many organizations is that top management is only interested in ideas that can save $1 million or more. What they don't realize is that even ideas that save $50 can add up to impressive money. It's also far less expensive to eliminate waste than it is to try to increase revenues. Let's say your organization has 1,000 employees and those employees generate $250,000 in cost savings. If your net profit was 5 percent and your sales were $20 million, in order to realize that $250,000 in savings, you would have had to increase your sales by $5 million. But, by cutting costs, you have achieved the same goal without incurring any additional expenses.

Southwest Airlines and Amazon.com are companies that have realized the benefits of controlling costs. Southwest Airlines, the only profitable airline in the United States, and Amazon.com, the e-commerce phenomenon, focus on eliminating waste and reducing costs. By being frugal and passing savings on to their customers, both companies have achieved market dominance.

You can realize similar success by implementing an employee suggestion program similar to one we have developed at the Service Quality Institute. BAD (Buck-A-Day) urges every employee to find a way to reduce costs by at least $1 a day. During the past 30 years, BAD has been successfully implemented in more than 3,000 organizations throughout the world, from manufacturing plants to banks. It works on the principle that employee involvement leads to commitment and that front-line employees have ideas that are vital to the success of any organization.

BAD involves five categories: reducing costs, identifying recurring problems, improving quality, eliminating delays, and generating revenue. Although the idea-collection phase of BAD lasts only 30 days, the cost savings generated by the program have a permanent impact. Basically, you are looking for relatively simple savings, small steps that can be taken to cut down on materials or the time taken to complete a particular task. The idea is to get employees to consider each job and then ask, "Is there a better, less-expensive way to do this?"

If you want to start mining your employees for their ideas on how to cut costs, implement an employee suggestion program. And, if you want that program to be successful, take the following steps:

Make the program fun. In order to be effective, the program must be fun so it captures employees' attention and heightens their enthusiasm. The more excited they are about the program, the better the results will be.

Involve all management and all employees. This is the backbone of any successful suggestion program. When you get employees to buy in to what you are trying to accomplish, they will work hard to help you reach your goals.

Ask for small ideas. Reinforce that you want to grab the low-hanging fruit. When you ask employees to identify small ways to save money, you are giving them a non-threatening goal. If they think they have to come up with suggestions that will save the company $25,000 or more a year, many of them won't even attempt to participate.

Recognize employees whose suggestions are accepted. Celebrate them and their suggestions. Make them look like heroes. Praise them. Publish their pictures and ideas in the company newsletter.

Management must give timely feedback. If employees think you aren't listening to them, they will give up. It's critical that you acknowledge every suggestion and that you do so in a timely manner.

Successful companies recognize the importance of reducing costs and passing savings on to their customers. No longer can you merely raise prices in order to survive. Your customers won't tolerate it. If you want to survive, it is critical that you identify ways to dramatically eliminate waste and reduce costs.