Tag Archives: cost centers

Demonstrating value in a cost-center: the one-two punch

I head up a division of the company that is in many ways (though not all) internally focused – building best practices, improving coordination, being more effective with clients, and so on. The challenge with these types of departments is that they are cost centers for the most part (i.e., not direct revenue generators, like sales), and so we need to think creatively about demonstrating value to the rest of the organization.

There are many ways to do this, but I think it boils down to two broad strategies.

One, think about metrics that tie cost center activity to company goals. The first group to be on the chopping block when money is tight often appears to be cost centers, rather than revisiting efficiencies in revenue centers. Internal IT is the poster child of this phenomenon. But what if internal IT had, up to that point, been regularly issuing reports on the number of hacks and data breaches averted, the number of smooth technical onboardings occurred, the number of growing applications developed and maintained? Then the chopping block turns into questions of, “What percent of this value are you willing to sacrifice?” and “What level of efficiency in systems are you willing to compromise?” and “What additional risk are willing to accept?” rather than simply, “What can we outsource to save money (because on paper they do the same thing)?”

Here, think in terms of a “balanced scorecard” – an excellent concept described by UC Berkeley’s Dr. Toshi Shibano in his Strategic Financial Literacy course under the university’s executive education series. Financials are really just a single dimension, which everyone will naturally gravitate toward. Can you produce data on other dimensions, such as customer satisfaction and retention, cycle time or turnaround time, productivity, and innovation, in order to demonstrate value?

  • Pro tip: distribute balanced scorecard reports before your department is at risk of being on the chopping block!

Two, leverage relationships. Don’t have them? Go  build them. This can be especially hard for individuals working in a company’s internally-focused cost center teams, whose initiatives require skills in infrastructure-building, accounting, or other administrative and operational responsibilities, rather than explicitly relationship-building. But you don’t have to be a schmoozer to build relationships. (Really!)

The easiest way to do this is to identify 1-2 relevant people to go talk to for 30 seconds after you’ve sent out an email, whether it’s a reminder, a notification or FYI, a request, or a call to action. Asking individuals in person if they had any questions about what you sent out, or asking their opinion on the content, is a great way to make sure other parties in the organization are aware of your work and your role.

  • Pro tip: Get buy in from people before the email goes out – even better!

This is especially important in our company where I’m trying to get people to comply with established best practices when everyone would rather stick with what they’ve always done. Walking around the office and spending a minute verbally engaging with people to brainstorm how it’s relevant to them does more to get compliance than any formal email or “roll out” of company policy alone.