Reducing Costs without Reducing Progress

Operating labs more efficiently is a constant goal for laboratory managers. The current recession has added to the pressure to cut costs. At large companies reasons for high cost often include a complex organization and a consensus-driven culture. Due to the number of internal transactions that must occur, the focus on execution is often insufficient. Flatter organizations with fewer layers of management and larger spans of control for each manger can reduce the number of required internal transactions. This promotes faster decision making and execution.

This in turn increases the lab's responsiveness to business demands. Fewer people will be making strategic decisions and developing strategies while more will be working at the lab bench implementing choices managers make. A leaner lab management structure can promote clearer choices from the potential project portfolio resulting in faster development and deployment of high-impact new technology. Increasing the pace of decision making can reduce the time needed for individual project completion. Leaner management is responsible for the greater nimbleness of many small organizations in responding to business needs.

Reducing costs

Reducing project costs will improve profitability of new product, processes and technical service operations. Lower costs will make the laboratory a more attractive partner for suppliers and customers when conducting joint research.

So how can lab managers reduce costs without reducing progress on critical projects? This requires a shift in mindset by both managers and their staff members. They must calculate or estimate the value added of everything they do, both internally and externally. Projects that don't have the potential to add sufficient value must be eliminated. The focus must be on executing activities utilizing the core strengths of the organization. Support activities must be eliminated or their costs reduced. Lab managers should outsource more commodity-type functions to individuals and organizations that can perform these functions more cheaply and thus reduce overall costs. For example, outsourcing laboratory facility maintenance, cafeteria operation and security is now common. Functions such as literature searching and routine analytical work are increasingly outsourced.

Acquiring technology

The laboratory must deliver technology-driven competitive advantage to the organization. In addition to working with suppliers and customers to do this, lab managers should consider acquiring technology through open innovation facilitators and funding university projects. Funding projects through consortia can spread costs among several organizations. Many refer to these strategies as breaking the "not invented here" bias against capitalizing on external technology. Importing technology can enable desired results to be achieved more rapidly and at lower costs than relying only on internal efforts to develop and supply needed technology.

Effective project management

Improving laboratory performance requires using appropriate metrics for each project to track progress and costs relative to the original project design and budget (Using Research Metrics Helps Get More Bang for Your R&D Buck and Using Benchmarking Metrics to Improve Laboratory Productivity). It also means making the laboratory a learning organization in which individuals and teams actively share the lessons learned and best practices developed in the course of their work.

Next week we'll discuss designing projects so that, if they are going fail, they fail quickly.