Carlos Ghosn is the chief executive of the Franco-Japanese alliance of Renault SA and Nissan Motor Co. On a visit to India in early 2007 to do a deal with Mahindra and Mahindra Ltd (M&M), he coined the term "frugal engineering".
“Frugal engineering is achieving more with fewer resources. The cost of developing a product in the West is high since engineers there use more expensive tools. In India, they achieve a lot more with fewer resources”.
Recently Daiichi of Japan has acquired Ranbaxy, one of India’s most successful Pharmaceutical Companies, to leverage on its low cost base.
The concept of frugality has been misunderstood by a lot of companies as being miserly. Consider this news story seen in a prominent newspaper, “techies would need to carry tissue paper, toilet paper and bottles of Hand wash to office”.
Cost cutting and having a systemized approach to saving costs are two different things. A systemized approach to cost saving is actually understanding the very work which is needed to be carried out and then after a careful analysis of all options choosing the most appropriate manner of going about doing it. The “Best” need not be the most appropriate. That can be ascertained only by a correct need analysis.
Similarly miserliness can be counterproductive. Take the case of the IT Company stopping the issue of toilet paper. While it may save a small percentage of direct cost, the indirect cost could be huge. Such examples tend to frighten employees into beginning job searches in the thought process that their company is sinking. This reduces their effectiveness and lowers productivity. For each employee lost it costs up to 50% of the gross annual salary of that employee in replacement costs, training, reduced productivity etc.
Frugality needs to be an idea which needs to be part of the ethos of a company with a complete buy-in from the stakeholders, not an idea which can be enforced. It should not be a knee jerk reaction but a carefully induced concept.
Frugality needs to be a way of life.
“Frugal engineering is achieving more with fewer resources. The cost of developing a product in the West is high since engineers there use more expensive tools. In India, they achieve a lot more with fewer resources”.
Recently Daiichi of Japan has acquired Ranbaxy, one of India’s most successful Pharmaceutical Companies, to leverage on its low cost base.
The concept of frugality has been misunderstood by a lot of companies as being miserly. Consider this news story seen in a prominent newspaper, “techies would need to carry tissue paper, toilet paper and bottles of Hand wash to office”.
Cost cutting and having a systemized approach to saving costs are two different things. A systemized approach to cost saving is actually understanding the very work which is needed to be carried out and then after a careful analysis of all options choosing the most appropriate manner of going about doing it. The “Best” need not be the most appropriate. That can be ascertained only by a correct need analysis.
Similarly miserliness can be counterproductive. Take the case of the IT Company stopping the issue of toilet paper. While it may save a small percentage of direct cost, the indirect cost could be huge. Such examples tend to frighten employees into beginning job searches in the thought process that their company is sinking. This reduces their effectiveness and lowers productivity. For each employee lost it costs up to 50% of the gross annual salary of that employee in replacement costs, training, reduced productivity etc.
Frugality needs to be an idea which needs to be part of the ethos of a company with a complete buy-in from the stakeholders, not an idea which can be enforced. It should not be a knee jerk reaction but a carefully induced concept.
Frugality needs to be a way of life.
1 comment:
Good one Sunil, Keep it up.
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