Uncertain times in Norway and abroad mean that many companies in competitive sectors will soon have to downsize considerably.
However, the cost savings will be far less than they could be, if a company does not have central control of its liabilities.
All bad things come in threes
- Far too few companies have a central overview of the contracts that form the basis of their total costs.
- Contract periods, specifications, prices, contact persons, entitlements and liabilities are scattered across employees’ shelves, drawers and PCs.
- When the wave of redundancies comes, the last residue of control disappears – and the cost savings become far less than they could be.
“I am not a socioeconomist. I don’t known how things are going in the EU and elsewhere. But I do see that far too few companies are adapting to the financial risk picture that the media are reminding us of every day. And it’s only because they have neglected to take some simple and inexpensive steps”.
Lasse Sten, founder and CEO of House of Control
Sten is referring to contracts that individual employees have signed on behalf of the company, which were intended to improve operations, but which can either become less of a priority when times are tough, or which in the worst case are no use whatsoever to the company when that person walks out of the door.
“These contracts can be for anything from regular goods deliveries to subscriptions that run for several years. What these corporate contracts and other liabilities all have in common is that they are associated with large numbers of employees, and are hidden away in drawers or on a server. When these employees have to leave the company, there is no mechanism for cancelling these contracts”.
Variable costs become permanent
As well as liabilities associated with day to day operations, there are costs associated with every employee: Insurance, gym subscriptions, newspaper subscriptions, mobile phones, etc. Companies that are not in control will discover that costs which are supposed to be variable end up being permanent. You see them in the annual accounts, but you are not in control of the contracts behind them. Lasse Sten urges every company – even those which are not susceptible to international fluctuations – to have a closer look at how much control they really have over their future liabilities.