How to Apply the Cost Management Scorecard

The main reason businesses do not grow is because their activities are not cost effective. Due to this, many businesses end up in an untimely bankruptcy when the managers could have done something to prevent it. One way of solving this is through the application of a Cost Management Scorecard. This is something that sprouted from the Balanced Scorecard, which was popularized in the 1990 by Drs. Robert Kaplan and David Norton. Nowadays, almost all corporations use this strategic management approach to solve any issues in their industries.First off, one needs to accept the fact that there are many activities out there that are cost effective. Once these activities are identified, the management can then figure out what things have the most impact on their budget. This is something that can be easily seen, especially if the agreement with the client is something to the effect of pay-for-performance.First in the set of metrics in the scorecard for cost cutting is the yield of hiring. So many people think that hiring people now and again will result to better performance. Attrition is something that is really costly, and it is actually more costly to train new people. According to many studies, it will take at least nine months of operation before a company gets an investment return for every employee that was trained to do a job. This means, if you keep on losing people, this is a very large expenditure. One should be able to find ways in retaining employees.Second, quality of service is a very important metric to check. Poor output means rejects or defective products. These things, when accumulated, will show an impact on costs. There should be a standard procedure in correcting these defects and sustaining good performance in terms of quality. Sometimes, it is not the employee’s fault at all. There has to be a regular check and calibration of machines that are in place to see if these machines are working right.In terms of customer service, the customer service representative should ensure that the customer’s concerns are all resolved. If customer’s issues are not closed, they are definitely going to call back and this is an added cost. Also, CSRs should also be careful in providing information, since it is clear that any misinformation will result to a callback, which is an added cost.Another metric that one may look into is productivity. If employees are relaxed and not being productive, this is going to result to extra cost. The time that could have been used for production or operation is spent on something else. This means that the managers should oversee the productivity of these agents and measure these things on a regular basis. Sanctions should be given to those who underperform.Generally speaking, it is entirely wrong to take away things from employees just because the tools they use are deemed expensive. What needs to be done is to put in place a process that will allow employees to be more productive, instead of cutting on costs through materials. Managers should have a document that applies cost management scorecard principles, so as to guide employees accordingly.