The Pursuit of Profit

In the business world, maximizing profit is a constant goal. However, this should never be the sole focus. Yet, many companies make this mistake. When we focus only on profit, we often overlook potential losses. Let’s consider a scenario that illustrates this point .

Cost Reduction

When a company anticipates future financial difficulties, significant internal pressure often arises for all departments to reduce costs in order to increase profit margins and stabilize the business during challenging times. This practice is common across various industries.

In a strategic meeting, leaders of a particular department decided to cut operational costs by replacing an older team with new hires. This team had been with the company for many years, and its employees were earning high salaries for their support positions. The leaders, viewing the team as just another technical support unit, believed its responsibilities could be redistributed to other teams.

This decision initially appeared reasonable and straightforward. However, in large companies, older teams are often not regularly reviewed, resulting in poorly documented processes.

The Change Begins

Decisions are sometimes made far away from where the actual work happens, without a clear understanding of what is really being done by the team in question.

As requested, part of the team’s functions were distributed to other support teams with similar functions, who were not accustomed to these tasks but had enough knowledge to navigate the issues. The new hires, often trained by the outgoing employees they were replacing, began their work with the help of the old team.

Eventually, the new employees took over the roles entirely, and the old team was phased out.

The first few weeks were a struggle for everyone who remained, but everything seemed to be settling down. Then, suddenly, chaos ensued.

One of the company's main systems went down, and nobody knew why. Upon investigation, it was found that the system was not only down but completely compromised due to a serious mistake.

Now imagine a major online sales company, someone that provides services for online selling capabilities of its customers, worldwide, suddenly everyone everywhere is unable to process sales, how much would that cost? It's safe to say that the company would be not only bleeding, but hemorrhaging money.

After a few hours, they managed to implement a temporary fix. But before the investigation could conclude, another issue seemed to occur in a different environment, followed by another, and another.

Emergency calls became a constant occurrence, senior executives, including Vice Presidents, Directors, and if things are bad enough, even the CEO, would be joining these calls. Of course, the leadership would be demanding answers, why the suddenly eruption of problems? They now were heading to bad period with a financial hit and some would be definitely be losing sleep over that fact.

But investigation can take time, depending on the issue, and the company could have lost millions even before the RCA (Root Cause Analysis) concluded.

And when it did, it revealed that the problem was either human, or because of a lack of action of someone. And if investigating further, they reach that the old team that was replaces, was the one responsible for preventing such issues. They were specialized in the company's tools and environments, with the experience they got on the job, learned to anticipate and prevent huge problems, which would have been saving the company significant amounts of money.

The new, less experienced team could not provide the same level of expertise. Moreover, none of the other teams who assumed the old team’s responsibilities even knew that the old team even performed these critical preventive functions.

This situation highlights a metric that few companies track: the cost saved by such teams is not equivalent to profit gained nor directly associated with cost reduction. It is rarely accounted for in metrics, especially in support teams whose managers or directors change too frequently, they end up not fully understanding the real work being done, the level of knowledge required, or the team's journey to achieve such expertise that could be unique to the company.

The old team was likely taking on responsibilities beyond their initial scope, stepping in to stabilize the environment and preventing issues. They were doing over and beyond, and to save a few thousands, the company got them replaced and ended up losing millions.

Extraordinary preventive work often goes unnoticed because it is behind the scenes and does not result in immediate, tangible outcomes that are easy to measure or highlight. The absence of problems due to effective preventive measures can lead to the undervaluation of the teams and individuals responsible for such work. As a result, the critical role of preventive efforts in maintaining smooth operations and preventing crises is frequently overlooked, making such situations more common than one might expect.

The Ongoing Problems

And now, without the old support team, the company still has to face the issues that the remaining staff couldn't resolve. These problems would have to be escalated to more senior, specialized teams, and possibly even external vendors. Which is time-consuming, involves numerous calls, and can be particularly challenging if issues arise outside regular working hours.

During these technical issues, customer satisfaction declined due to frequent disruptions and long resolution times. Complaints increase, potentially driving customers to seek alternatives with competitors.

And of course, the financial losses incurred during this period were likely many times greater than the cost of maintaining the old team. Additionally, there was a negative impact on the company's reputation, and the remaining staff faced increased workload and stress.

This situation could have been easily avoided with effective internal process knowledge or a proactive loss prevention strategy.

Fortunately, awareness of these issues is growing. Many companies now have Risk Management teams specializing in loss prevention. It is crucial to pay attention to the details, review all aspects before making decisions, and always recognize the importance and the voice of those who actively prevent problems within your company. By valuing and supporting preventive efforts, companies can avoid unnecessary disruptions, maintain customer satisfaction, and ensure long-term stability and success.