Leadership vs. management: Observations on the successes and failures of cost-reduction programs

Mining managers trying to rapidly reduce production costs tend to implement a traditional set of top-down managerial practices: reductions in production volume, employee layoffs, renegotiation of supplier contracts, cancellation of employee training, restrictions on travel, reductions in office supplies, and so forth. While these practices do reduce costs, the benefits are often limited in both magnitude and duration, and the workforce is usually left demoralized. Successful cost-cutters take a different approach. They make the continuous reduction of costs a priority for all members of the organization, whether managers or workers. The culture of these firms emphasizes the commitment, voluntarily given, of individuals and work groups to this goal. Cost-cutting practices often reject all of the traditional methods mentioned above, but are far more numerous, innovative and successful. This culture of cost reduction is the result of a set of leadership competencies that establish direction for the organization, align the organization's various constituencies with this direction, and motivate and inspire the organization. Cost reduction then becomes a routine task rather than a heroic achievement.