Costs are out of control because the use of time, resources, and supplies are not always directly linked to money.
I just worked on an improvement workshop where one of the targets was to reduce cost in after-clinic dictations. Until we discovered the rate per line associated with dictations, providers did not consider there was a meter running.
I read Dan Ariely’s Predictably Irrational last year and never connected his chapter on stealing and cheating to how organizations easily spend out of control. The attached 19 minute video goes into deeper detail about his findings (RSS readers will need to open post to view). He found people would steal a coke from a fridge but not a dollar bill. He saw people cheat more if their reward was a token to be exchanged for money instead of the group who was given money directly. He asks if it is easier to steal a pencil or a dime from somebody’s desk.
His findings were people steal or cheat more the farther away from actual money it seems.
I honestly do not think staff is intentionally stealing but this concept can be applied to organizations. If there is not a direct connection between the use of something and the cost associated with it, then spending becomes rampant. Make costs visual, talk about them in meetings, show where you are saving money. In this tough economy, most staff would rather help save money than risk seeing them or their co-workers lose their job.
My 2009 Hansei: Scarcity inspires creativity and innovation. How can I help harness that inspiration?