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Always good to begin a blog with a few disclaimers, no?  Here goes.  I don’t have an MBA.  I’m not an accountant, nor have I ever played one on TV.  And yes, I accept the basic business principle that a successful company maintains a strong margin; that revenue is only useful when it outpaces one’s expenses.

Having said that, it strikes this observer that, in recent years, we’ve, as an industry, placed such an inordinate emphasis on reducing costs that we’ve, in extreme cases, hurt our revenues.  In fact, it’s hardly just the real estate and mortgage industry.  A few examples:

1. The large company that contains costs by skimping on its call center or customer service budget, resulting in long wait times, poor customer interaction, and unresolved or unsatisfactorily resolved issues.  What follows is, inevitably, reduced customer loyalty, diminished brand and, eventually, diminished revenue.
2. The mid-sized company that spends its days replacing lost talent because it pays below-market compensation or has forgotten that people (including employees and managers) may be numbers on a spreadsheet, but not in real life.  The cost?  Time and money in recruiting, hiring and training replacement talent.  Customer loyalty where the lost talent was a source of contact for the client.  And so on.
3. The any-sized company that considers itself entitled to its profit, rather than entitled to compete for a profit.  That sort of thinking usually comes home to roost when any and all expenses are immediately passed on to the customer.  I’m looking at you, airline industry.  There’s no such thing as a captive customer, and thinly-veiled profit grabs eventually come home to roost.

Whatever happened to “to make money, one has to spend money?”  Whatever happened to the “cost of doing business?”  These are terms that have simply vanished.  I don’t like them either, but the alternative is producing a lesser product or service in many cases.

I most certainly do not advocate a return to the days of three-martini lunches on the company account, bloated holiday parties, admins for every middle manager, excessive and unnecessary software or other generally wasteful spending.  But it seems to me that too many businesses have gone well beyond cutting the fat of their operating expenses, and are digging deep into their own muscle and bone.  Obviously, as a marketing guy, I believe that marketing budgets shouldn’t be a luxury.  But beyond that, I see a national corporate culture that spreads its workforce way too thin.  And while that’s understandable in poor markets and lean times, I believe this is a trend that started long before the Great Recession.  I see an emphasis on multi-tasking that leads to mistakes, low morale and poor performance.  I see a general decline in the quality of many products and services.   I see outdated software and hardware.  I see a growing acceptance of lesser service, missed deadlines, poor communications or faulty products as a byproduct of “that’s just the way it is.”  But one quality competitor can change that in a heartbeat.  

Yes, I know that the United States has a disproportionately high cost for personnel (a topic for another blog).  Yes, I understand that, especially in our industry, times are, indeed, lean.  But I believe firmly that the cost of looking only at costs is even higher.