12 hidden costs that every businessman should know about

By justchinait
January 22, 2021

Enterprises will always encounter bottlenecks in the development process. They feel that operating costs are high, but it isn’t easy to find the price. We call this “hidden cost.”

If these “hidden costs” can be found, it is undoubtedly like finding a “pathogen”; then, the next step is to “prescribe the right medicine”. If you can summarize the various “hidden costs” that companies often have, companies can conduct self-inspection accordingly. The twelve kinds of “hidden costs” are outlined as follows:

1. Conference cost

The meeting is a collective activity for companies to solve problems and issue instructions, but it is also a high-cost business activity. Because this activity is often a joint activity involving many leaders, every minute that passes means the number of minutes of the total number of participants, and many corporate managers have not mastered the meeting skills, and there is a general “unpreparedness before the meeting.”, There is no theme in the meeting, no implementation after the meeting, no need to attend the meeting, no time control, and no bounds in speech.

2. Purchase cost

There used to be a company that, when doing a new project, the daily operating cost of the project team was 80,000 yuan. However, on the eve of the product launch, the purchasing department spent a week to purchase more than 100,000 yuan of packaging. The reason was to Find cheap suppliers to save purchase costs. As a result, the entire marketing team waited an extra week to sign contracts with customers.

This phenomenon exists in many companies. Blindly seek to reduce the direct cost of procurement and ignore the coexisting “hidden costs”. Of course, reducing the direct cost of purchase does not conflict with this article. Here, we are talking about the procurement department of an enterprise. Only by comprehensively weighing various indicators from the perspective of the overall operation can the cost of procurement be truly controlled.

3. Communication costs

In most companies, you will find that there will be severe distortions in the process of communication with colleagues, or the words are not expressing the meaning, or the answers are not answered, or the people are confused This kind of phenomenon is too small. Make many processes become ineffective or lose many vital opportunities. If it is too big, it may cause hidden dangers to the enterprise.

4. Overtime cost

Many bosses always think that the “overtime” of employees “waste sleeping and forgetting food” after work is a phenomenon of dedication. As everyone knows, this may imply a high cost. There are three reasons:

1.working overtime is not necessarily because they work is too heavy, but because of the employees’ low efficiency. Overtime means low energy.

2. working overtime consumes more energy and physical strength of employees and seriously overdrafts employees’ health. If it goes on, some essential employees will not be able to perform their performance for a long time, and it will bring hidden dangers to the company. For example, some machinery operators Working overtime for a long time lead to fatigue and accidents, and companies have to pay a heavy price.

3. employees who work overtime do not necessarily have to work correctly. Some employees work overtime after work. They use the company’s resources to do their personal affairs and receive the company’s overtime pay. This is important for many companies. Data loss, Etc. All occur during off-duty hours, and over time, enterprises have become a blind spot to “hide dirt and accept dirt”.

5. The cost of talent flow

Many companies are very lacking in human resource management. They think that talents are unlimited, and they have become “iron-struck camps”, and employees naturally become the “flowing soldiers”. It must be said that the departure of an employee is a cost to the company because the company has to bear the initial investment of the employee’s training fees, as well as the initial cost of recruiting new employees for the position and whether the new employees are suitable The risk of this position. The resignation of old employees may also lose critical internal data or information due to professionalism, and after their departure, they may enter the company of their competitors.

Therefore, the loss of employees, especially old employees, will undoubtedly bring expenses to enterprises several times higher than their income. After many small companies have been in business for many years, you find that they have always been such a small team, and apart from the boss, none of the employees are left from the beginning of the company.

6. Cost of job dislocation

There is a famous saying in human resource management “put the right people in the right place”. Unfortunately, there are not many companies that can do this.

I once recruited in a talent market and heard conversations among its employees, saying that every job fair requires all employees to move tables and chairs because the rented gymnasium is used as a recruitment venue. From professional managers to ordinary employees, they all become “porters”. I can’t help but sigh. This company is engaged in talent recruitment and management. How can it spend such a high salary on hiring unprofessional porters?

This embodies the distinct psychology of the bosses. They think that these employees will be used when they are recruited. As long as they can do it with their own hands, they don’t need to spend more money. But we found that they paid a high price. The company employees have been complaining because quite a lot of them are female employees, who have no strength to move desks and chairs. Those high-ranking officials have never experienced this kind of “courtesy”, and some have left their jobs. We have never recruited at this job fair because I don’t believe that such a team can provide me with excellent service.

7. The processes cost

Too much chaos in enterprises is due to processes. This is a common problem in corporate management. For companies that develop slowly, their operations must be chaotic or unreasonable. They bear high costs for this, but they have been turning a blind eye. The process is the industrial chain of enterprise operation. Like an assembly line, without scientific and reasonable methods, systemic control over various tasks will be lost. Many jobs are abandoned halfway, and many assignments need to be reworked. This will become a mess that binds the company’s feet.

8. The cost of stagnant resources

Stagnant resources are arguably the most extensive “hidden costs” in an enterprise, such as idle equipment, overstocked inventory, low-utilization jobs, unused funds, and suspended businesses, although they may not continue to consume the enterprise. However, they are part of the company’s assets, and the company will bear hidden costs, such as interest. Therefore, the amount of stagnant resources in an enterprise reflects the level of enterprise resource utilization.

9. Corporate culture cost

Some people say that corporate culture is like the soul of an enterprise, which will be reflected in every member’s mental outlook. This kind of religion began to be established in the early stage of the establishment of a company. It was influenced by the culture, habits, skills, occupation, likes, and dislikes of its founder. Therefore, some people say that corporate culture is the boss’s culture.

However, many people may disagree that corporate culture will become a cost, but it is true. We will find that the employees of some companies are sluggish and extremely inefficient. No matter how good employees are, they will either leave or become like that soon after entering. We have to say that this is an “environmental” issue. And this “environment” is precisely the corporate culture of this company.

Corporate culture is like the life of a company, it will accompany the company’s growth, and it can only be adjusted, not rebuilt.

10. Credit cost

This is a cost involving long-term returns, and operating with integrity is like being a man with integrity. We have found that many companies are accustomed to defaulting on supplier payments, defaulting on employee salaries, accustomed to deducting others, accustomed to defaulting on bank loans, Etc, thinking that this can reduce the pressure on corporate liquidity.

However, in the long run, this will become a severe hidden cost of business operations. First of all, suppliers must include the time cost in their quotations. Such companies cannot purchase the lowest prices of raw materials or services. Secondly, employees who are in arrears with wages violate labor laws and risk being punished. However, defaulting on bank loans and deducting others will significantly reduce their creditworthiness. When a company encounters difficulties one day, it will be embarrassed on all sides. Undoubtedly, enterprises have to pay a heavy price for this, but in fact, they have not gained any benefits.

11. Risk cost

Pushing the enterprise into the fast lane is the dream of every entrepreneur. But the risk factor also increased simultaneously. Unusually large and medium-sized enterprises, although they have developed rapidly and have enormous incomes, once a crisis occurs, it will be catastrophic. Many cases have proved that many of the risks of enterprises are caused by insufficient anticipation or poor management. Hidden dangers are buried long before the risks occur. And many large companies or well-known companies die out because of risk.

It can be seen that risk is a high hidden cost. However, this phenomenon is not apparent; it is really “not a song; it is a blockbuster.”

12. Entrepreneur cost

“Entrepreneur cost” refers to the cost that the owner of the enterprise brings to the enterprise. There is a kind word, a raging soldier, and a raging nest. Entrepreneurs are like the leaders of an army, but they are the enterprise’s most expensive employees. The bosses of many private enterprises have turned themselves in to the “emperor” of the enterprise, and everything has the final say, and all employees have become execution machines. However, the shortcomings of the entrepreneur’s factors will add a substantial cost burden to the enterprise.

This phenomenon is mainly reflected in small enterprises. Still, this phenomenon also exists in large enterprises, and we can also extend this cost to every department or even every employee of the enterprise. Because everyone is responsible for their work, we often emphasize that in your scope, you are the leader, and you have the right to make decisions. Many leaders have always focused on themselves, which will significantly reduce the team’s combat capability and increase the high hidden costs. I remember once said to a boss who complained about the company’s lack of talent: “What your company lacks is not talent, but the wisdom to discover and make good use of talent.”

It can be seen from the above that companies often have to shoulder many burdens in their operation and management, and hidden costs are the most onerous burden among them. Discovering and effectively reducing the above-hidden costs is a robust measure for corporate progress.

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