Wednesday, May 6, 2009

Oh the fallacy!

Ok - TOC has indeed given me new thinking skills. In the past I would never have challenged an article that promotes methods to cut costs. I ran across an article via my inbox today entitled "How to slice 30% off your learning costs." (published by trainingzone.co.uk). Wow - 30% cost reduction - that's huge. My first thoughts were back to The Goal when Jonah acted really impressed when Alec Rogo told him of the impressive productivity gains by automating processes in his plant and also something I read in the Haystack Syndrome where Dr. Goldratt makes the observation that most cost savings never reach the bottom line in terms of net profit.
Armed with this insight, I read through the article. Besides the fact that the author was pulling numbers out of thin air without an ounce of supporting analysis (e.g. "You could save 7% of your supplier costs by improving supplier management. That equates to a 2.8% reduction in overall learning spend."). Most of his techniques for reducing cost involved reducing the effort of the training organization. So the question from TOC standpoint is - how much of this labor is variable and how much is fixed. Assuming your training department consists of a certain number of full time employees, you are going to have to pay them regardless of the amount of work they are doing - so what is the cost savings? well... nothing obviously.
I think this article has merit since it suggests techniques that may indeed help the training department reduce truly variable expenditures - however, the 30% cost saving is, in my humble opinion, a bit of a fallacy.

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