Turning Cost Centers Into Cost Savers

With almost 15 years of experience in the financial industry, and hedge funds in particular, I have held responsibility for not only enabling my organizations to use the best information available to make effective investing decisions and earn money, but also to effectively KEEP as much of the money earned as possible. I held this responsibility not as a trader or a front-line deal maker, but by working for and uniting two of the largest cost centers of these organizations - Operations and IT.

To be sure, any organization's Operations and IT groups are cost centers, especially when considered separately on their own. They exist as internal machines of the business, providing:

- the automation of workloads
- the storage of current, transient, and historical information
- the bookkeeping and checks and balances
- warehouses of business knowledge
- communication conduits to the front lines of the organization
- suggestive voices for organizational improvement and advancement

Put simply, Technology procurement and development costs money. Staffing and supporting Operations costs money. But now consider these other cost centers:

- fees on money held away as collateral for investments that have already matured, expired, or otherwise unwound
- time and effort repairing transactions and bookkeeping entries incorrect by factors of tens, hundreds, or thousands - discovered, validated and verified only well after their transaction dates have passed
- repetitive outbound money transfers now unnecessary due to changing market or exceptional conditions
- minutes and hours spent daily modifying business processes to work around technology limitations, because the technology in place is the only option offered to the business
- minutes and hours spent daily installing technology to keep pace with the cacophony of uncoordinated and seldom-related business process improvement requests
- unrecognized internal or external business events not brought to a principal's attention in a timely manner

These cost centers truly translate into money lost, not spent. Technology alone cannot automate and execute all of the business decisions required to reverse the direction of cost spent. Nor can Operations alone leverage enough manpower to execute and reverse the direction of cost spent in the necessary transactional time frames of seconds, minutes, and hours. If your organization can truly acknowledge the above as real cost centers threatening the bottom line, and acknowledge that IT and Operations separately cannot represent a silver-bullet answer, then your organization can recognize that a unified cohesive effort is necessary to reduce or eliminate these cost centers.

Now take notice of the last cost center mentioned above. Unrecognized events, being that they are unrecognized, do not have a workflow built into the technology to resolve them, nor are there any accruals previously posted on the books and records to account for them. Yet a poorly-priced security or trade, a trading partner's sudden unavailability to participate in a supply chain, or an incorrectly-prioritized customer order, could easily skew an organization's valuation or daily health snapshot into a hazard zone.

These events are the ones most sharply reacted to or chased after post-occurrence, often affecting not only the organization's capability to handle these scenarios, but causing a slowdown or loss in quality of the organization's regular business. If you are thinking that these events should be recognized rather than unrecognized, then you have taken the first step towards addressing the issue. The second step would be the desire to recognize these events and exceptions as soon as they enter into your business processes.

This is why I stress the need for organizations to become Exception-Tolerant, and build exception-based workflows into their business processes so that there IS a route for these exceptions to travel and begin to be handled timely. This can only be done through a united cohesive effort between Operations and IT, and is one of the best forms of internal risk management you could ever exercise.

So, can you unite your organization's Operations and IT cost centers into a more cohesive cost saver? Can you help your organization KEEP as much of the money earned as possible?

Communities Are A New Leadership Currency

I recently spoke with a member of one of my communities who recently lost employment, and is temporarily renting her house and relocating a short distance away while she conducts her job search. I lent a sympathetic ear and words of understanding when she told me her story, but I also reminded her that she was still part of our community, and her value in our community did not change just because her employment or housing status did. In fact, because she has been so proactive in responding to the recent changes in her life, she may have planted a seed of community with her new tenant, one that may prove to be very valuable to both in the future.

Creating and sustaining a community can be one of the greatest challenges we face during rough times. People often feel disconnected when they experience both large changes (employment status, income, housing, family) and small changes (the closing of a favorite restaurant, the turning of a calendar page, or even the weather). Reminding people that they can be, and are, part of an entity that accomplishes more and increases in value when the entity's members are connected - this is the essence of community.

As leaders, we step forward to create and sustain these communities. We understand that our communities are a viable currency for investing in our ideas, and earning success for all involved. As such, we must continue to remind others that we are part of something that can accomplish more when we are connected. We must make clear that those involved in the community are investing in a currency whose value rises rapidly the moment that they step forward to become involved. No other investment market can provide such an immediate rate of return.

Whether your community is in your family, in your place of business, or a non-profit in your community (all three in my case), remember to remind others that they can and do belong in your community. Be the leader that invests in and promotes the currency of community, and reap the near-term rewards now while understanding that the long-term rewards will be even richer.