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Reducing Costs Does Not Always Increase Profits

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To be blunt, taking measures at cost reduction is often a naive way of trying to increase profits. It’s not that there’s no place for it, but it’s typically first-level thinking that fails to see the big picture.

It’s like rent control in government: on the surface, it looks like controlling what rental properties can charge will keep prices down. But ultimately what it does is decrease the incentive for people to rent property, thus creating a housing shortage. This has been the well documented outcome in cities like New York and others, all over the world (see Thomas Sowell’s Basic Economics: A Common Sense Guide to the Economy for a great treatment of this).

The reason is that cost reduction measures often cut into the very things that produce the revenue for a company — including intangibles such as employee morale. (Yes, employee morale translates into revenue because it results in employees going the extra mile, treating customers better and more proactively, generating ideas that can enhance productivity and performance, and is even a more effective way to reduce costs because it reduces turnover.)

Here’s what Jeff Pfeffer has to say on this in What Were They Thinking?: Unconventional Wisdom About Management:

In case you haven’t noticed, in spite of the many rounds of wage cuts, the major airlines have continued to lose market share to the discount carriers such as JetBlue and Southwest and have continued to bleed money. . . . That’s because the solution management seized on — cutting workers’ pay — actually doesn’t do very much to make organizations more profitable and competitive or even, in some cases, to reduce costs.

Instead, cutting employee wages often worsens company problems. Hourly rates of pay simply don’t do nearly as much as most people seem to believe to determine a company’s — or even a country’s — competitive advantage. That’s because wage rates are not the same thing as labor costs, labor costs don’t equal total costs, and — in many instances — while it is n ice to be low cost, low costs and profits aren’t perfectly correlated either. . . .

The competitive success of airlines such as Southwest, Alaska, and JetBlue depends on lots of things besides wage rates. For a start, it’s nice to be able to offer customers a product or service offering they actually want to buy. . . .

Virgin Atlantic Airways has consistently pursued a strategy of offering more amenities and better service for both its business-class and economy fares, and has generated a profit when other airlines have struggled. After further upgrading its business-class seats and service in 2004, the carrier reported a 26 percent increase in business-class traffic for the fiscal year ending in February 2005. . . .

In the automobile industry as well, profits depend on more than just costs. Profits are also affected by brand image and product design and quality, all of which affect how much people are willing to pay for a car.

There is much more to being profitable (or, for a non-profit, having the funding they need) than cutting costs and being efficient. Often, the things that are most efficient — such as making sure employees feel that they are valued and respected and treated well — appear inefficient at first. But that’s just a short-term perspective. In the long-term, these “inefficient” things are actually more efficient, because they are the best prevention of the truly large and inefficient costs of high turnover and low quality.

What is the Fruit in John 15:5?

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In John 15:5, Jesus says “Whoever abides in me and I in him, he it is that bears much fruit, for apart from me you can do nothing.”

What is the “fruit” that Jesus has in view here? Here is a helpful exposition of the text from DA Carson, from his The Gospel according to John:

There has been considerable dispute over the nature of the “fruit” that is envisaged [in this text]: the fruit, we are told, is obedience, or new converts, or love, or Christian character.

These interpretations are reductionistic. The branch’s purpose is to bear much fruit (v. 5), but the next verses show that this fruit is the consequence of prayer in Jesus’ name, and is to the Father’s glory (vv. 7, 8, 16).

This suggests that the “fruit” in the vine imagery represents everything that is the product of effective prayer in Jesus’ name, including obedience to Jesus’ commands (v. 10), experience of Jesus’ joy (v. 11 – as earlier his peace, 14:27), love for one another (v. 12), and witness to the world (vv. 16, 27).

This fruit is nothing less than the outcome of persevering dependence on the vine, driven by faith, embracing all of the believer’s life and the product of his witness.

What is the Wasted Life?

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John Piper, in Don’t Waste Your Life:

God created us to live with a single passion: to joyfully display his supreme excellence in all the spheres of life. The wasted life is the life without this passion.

God calls us to pray and think and dream and plan and work not to be made much of, but to make much of him in every part of our lives.

Why Productivity Matters in Ministry: The Difference Between Seminary and Actual Ministry

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On Wednesday I asked what one thing about Getting Things Done you found to be most helpful. Thank you so much for all of your thoughts (both in the comments and by email). They have been really helpful!

Here is one comment from a reader that I especially wanted to highlight:

The whole concept/category of “knowledge work” was really helpful—never heard or thought along those lines previously. It helped to clarify practically why I struggle the way I do with productivity (my own heart issues obviously not addressed).

I wondered why I felt so incredibly productive in seminary and, well, the total opposite in ministry. Seminary was incredibly challenging, but it was so simple: just do what the professors assigned. All my tasks were clearly spelled out. Not so in ministry. As a self-employed “knowledge worker” with nobody handing me a syllabus, I was in quite a different position, and up to that point, I wasn’t able to clearly articulate why I felt so unproductive.

The label didn’t cure me—just clarified the problem. It helped to realize that I probably wasn’t the only one struggling.

I love this comment because of how it gets at one of the core challenges that I think many people in ministry experience — namely, the transition from seminary to full-time ministry and work.

This is the transition that actually got me interested in productivity in the first place. I went through seminary pretty fast — at one point I took 48 hours (= 16 classes) in a 9 month period. I did this without using a planner or even calendar (although I did write down a list of assignments once). One semester I completed all of my assignments within the first six weeks, and then had the rest of the semester almost entirely free from obligations (other than going to class; I used the time to work more and, I think, do more reading or something). I had never even heard of David Allen, and life worked great.

But then we moved back to Minneapolis (we had been at Southern Seminary in Louisville) and I started full-time at Desiring God. And my first task was not so small: launch a nationwide radio program while managing the church and conference bookstores at the same time. I found that my default practices for productivity just didn’t work. I realized I had to be more intentional and deliberate about how I got things done.

I had always read a lot. My focus up to that point had almost exclusively been theology. So I said to myself, “I’ll try to do the same thing with productivity — I’ll find some key books to read and try to develop an overall approach and system to keep track of what I have to do and stay focused on what is most important.”

At Desiring God, some people were reading Getting Things Done. So I picked that up. I also noticed that in the employee handbook for the church that they encouraged the use of Franklin Planners and would even pay $50 a year for you to get one and replace the pages each year. So I got one of those as well. This led to developing my own approach that merged what I took to be the best insights from David Allen and Stephen Covey, along with some of my own thinking.

Anyway, that’s how I got into productivity. I think the struggle I had is something that many other people also have experienced and continue to experience. And that’s why I resonate with Andrew’s comment above so much

Pursue Excellence, Not Being Elite

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A good interview with Andy Crouch, author of Culture Making: Recovering Our Creative Calling.

Crouch argues that “everyone should strive to make culture by humbly mastering a field that intersects with the world’s brokenness.” And he believes just that: everyone can make culture, not just the elite.

That seems to be a major difference between his book and James Davidson Hunter’s To Change the World: The Irony, Tragedy, and Possibility of Christianity in the Late Modern World.

Wasn’t Mark using street language so as to communicate with common folks, not elites? Does the difference between street and elite play into the difference between your book, Culture Making, and James Davidson Hunter’s book To Change the World? He seems to argue that elites make culture, and you write more about everyone making culture. Is that a valid distinction? Yes, that’s so true. Dr. Hunter and I have different instincts. When you ask when I first made culture, I don’t think of my first publication in a national magazine. I think of the “ABC Song,” because that’s culture. Where does cultural influence come from? It’s very mysterious—the Holy Spirit can work through a lot of different vessels.

I think that’s a key difference.

I respect James Davidson Hunter’s book very much, and learned a lot from it. But I also think he makes some critical mistakes, chief among them being that he fails to take into sufficient account the changes brought about by the rise of the Internet. In many respects I think a helpful companion book would be Jeff Jarvis’s What Would Google Do?.

Have a Growth Mindset, Not a Static Mindset

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From Josh Kaufman’s new book The Personal MBA: Master the Art of Business:

In general, there are two primary ways of looking at the world — two mindsets that influence your response to new experiences.

The first basic mindset is that your skills and abilities are fixed. If you try something and it doesn’t work, it’s because you’re “Not good at that,” and you never will be. You were born with innate skills and abilities that will never change.

Using this mindset, if you experience a challenge or difficulty, you’re likely to stop — you’re obviously not good at it, so why bother?

The second basic mindset is that your skills and abilities are malleable. If you try something and it doesn’t work, it’s because you haven’t worked on it very much, but if you keep trying, you’ll inevitably get better. Your skills and abilities are like muscles — they strengthen with use.

. . .

If you have a “fixed” mindset, challenges are a commentary on your worth as a person — you’ve been tried and found wanting, which makes trying new things feel threatening. If you have a “growth” mindset, challenges are simply an obstacle to overcome by working harder.

You can also see Josh talk about this concept at his website.

The First Rule of Doing Work that Matters

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Good advice from Seth Godin:

Go to work on a regular basis.

Art is hard. Selling is hard. Writing is hard. Making a difference is hard.

When you’re doing hard work, getting rejected, failing, working it out–this is a dumb time to make a situational decision about whether it’s time for a nap or a day off or a coffee break.

Zig taught me this twenty years ago. Make your schedule before you start. Don’t allow setbacks or blocks or anxiety to push you to say, “hey, maybe I should check my email for a while, or you know, I could use a nap.” If you do that, the lizard brain is quickly trained to use that escape hatch again and again.

Isaac Asimov wrote and published 400 (!) books using this technique.

The first five years of my solo business, when the struggle seemed neverending, I never missed a day, never took a nap. (I also committed to ending the day at a certain time and not working on the weekends. It cuts both ways.)

Effectiveness is Not Innate–You Have to Learn it and Practice It

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This is significant, from Drucker in his book The Effective Executive:

[The practices of effectiveness] are not “inborn.” In forty-five years of work as a consultant with a large number of executives in a wide variety of organizations — large and small; businesses, government agencies, labor unions, hospitals, universities, community services; American, European, Latin American and Japanese — I have never come across a single “natural”: an executive who was born effective. [emphasis added]

Did you catch that? Drucker wrote those words toward the latter part of his long career. He had been doing consulting work for forty-five years. He had consulted with executives in all types of organizations — all types. And he had consulted all over the world — all over the world. And he never came across a single natural. Never.

So we probably shouldn’t think of ourselves as naturals, either. And we shouldn’t be too hard on others we know and encounter that aren’t “naturals.”

Instead, we need to realize that if we are to become effective and increase in effectiveness, it comes through learning, effort, and practice. Which is what Drucker goes on to say:

All the effective ones had to learn to be effective. And all of them had to practice effectiveness until it became a habit.

And here is an encouraging word on that:

All the ones who worked on making themselves effective executives succeeded in doing so. Effectiveness can be learned — and it also has to be learned.