Fort Features: C.O.R.
If you listen to The FORT Podcast, follow us on LinkedIn, or do business with us, you’ve probably heard us talk about our ‘C.O.R.’ initiative (pronounced like ‘core’). It’s at the core of our business and has helped us generate over $1M in revenue and cost savings this year alone. Want to learn how you too can implement C.O.R. within your business regardless of your industry? Here is your guide to introducing C.O.R. to your team today:
What is C.O.R.?
C.O.R. is an acronym that stands for Cost Reduction, Overhead Management, and Revenue Generation. It helps your employees get into an ‘owner’s mindset’ where they are consistently looking to add value to your business.
Why should I implement?
In 2020 alone, we have saved almost $1M in annual costs.
How do I start?
C.O.R. is part of any business, but it’s important to integrate it into your company culture so each department is participating in the initiative. It needs to feel natural, and each team member needs to buy into the philosophy.
Step 1: Established the idea. Creating the acronym is important and helps to talk about it often which not only keeps it top of mind, but it also creates open dialogue. You want this idea to be sticky and integrated into all aspects of your business.
Step 2: Your team needs to see the impact immediately. Identify aspects of the business where you can create early wins. This will pique the curiosity of the team and keep them motivated and inspired.
Now my team understands the foundational concept. How do we start applying to each department?
After they understand the idea and see the results, you have to teach your team how each employee can implement this concept within their department. In true Fort Capital fashion, we started with a competition:
Our employees were divided into teams of two people. They had 30 days to come up with a plan to execute on one of the C.O.R. pillars. At the end of the period, we had presentations (similar to Shark Tank) where the teams pitched their ideas, and we rewarded the team with the most impactful idea. It brought new ideas to the table that even our Leadership Team hadn’t thought of, and it was an easy way to get the team excited and involved.
This simple exercise allowed the team to see how each department could do their part. It got them thinking outside of the box. From there, employees should start developing their own pattern of evaluation. Some examples of questions our team regularly asks when they are conducting their day-to-day work:
1. Do I need to spend this money?
2. Is this expense adding value to the business?
3. Is this a waste?
4. Is this a nice-to-have or a must-have?
5. Is this necessary?
The simple act of researching something that is the ‘norm’ can amount to large savings. For example, we negotiated one of our landscaping contracts and saved $162 per month or approximately $1,000 per year.
How do I measure success?
It starts with a baseline expectation and therefore goal setting. You want to give the team something tangible that they can reach and then reward them. This will create a mindset for each member to constantly be on the lookout to continue to achieve and therefore integrate into your culture. Often times a reward isn’t even necessary because the employee has come up with the idea and they are more bought into it than we are. They get wins when they see their impact on the company.
How do you ensure individual goals are aligned with company goals?
We started seeing hundreds of thousands of dollars in cost savings just in the first six months. This success didn’t happen through just individual goals though. We set our OKRs (Objectives and Key Results) based on the most important things in the company. From there, we set a very high-level objective and key result to improve that aspect of the business. But the people in that department are responsible for how to achieve it.
Additionally, many companies experience the “overhead creep” where these expenses just continue to grow and grow. Maybe it’s because a former employee had a subscription to a news journal or you’re paying for a service that has since been replaced. The problem with these expenses is no one owns them or feels responsible for them, so they just continue to build. We were able to eliminate this which greatly contributed to our success.
How do I identify those expenses? How do I prevent the “expense creep”?
Even though we are small, we developed a corporate mentality when it comes to budgeting. We create budgets annually and use the year prior as a baseline annual operating plan (AOPs). It incorporates every cost down to the paper towels and pens. If it costs money, we look at it. Doing this year over year gives you a real vision for where you are headed. This process isn’t that difficult and fairly simple once you bring in the necessary team members, but it does take time.
When should I start?
Now! Don’t wait until the mess hits to figure this out. We started this when times were good, and our market was up. We knew things weren’t going to be great forever, but setting up a process like this when things are good makes it a lot easier when things aren’t as good. Our team is already in the owner’s mindset/mentality in both good times and bad.
When we were focusing on the 2020 budget, we still realized how much meat we had left on the bone and removed an additional $275K from the budget.
Through COVID, we scraped again, and we cut a lot of the nice-to-haves and saved even more. But ultimately, building that culture early on and conditioning the team for months prior, just seemed like a challenge, not an alarm. It also challenges you to find even more ways to generate revenue which will ultimately pay-off in recovery. The conditioning also prevents creating a distraction. For example, when COVID hit, if we stopped everyone on their day-to-day work and challenged them to cut their costs by 25%, the day-to-day tasks would’ve fallen off completely and this would have been their sole task. Instead, it was a routine task. A rhythm they had already created, so they could get back to their priority projects quickly.
So that’s it… build into the culture and the team is responsible?
Not exactly. The team is largely responsible for the cost reduction and revenue generation aspect but the last piece, overhead management, is largely dependent on top management. We consistently ask ourselves:
1. Are we allocating resources correctly?
2. Are we delegating responsibilities correctly?
3. Are people being utilized in the right way?
4. Are their plates full?
Here are some tangible examples of how we’ve controlled Overhead Management:
1. You have probably had a department or employee come to you asking for help and if they can hire someone. We will admit we’ve fallen into that trap before. Now we look internally first, and we identify those who have bandwidth or areas where it makes sense for another department to assist.
2. Identifying those who are just fast movers and naturally take on more. You can’t operate the same way with 20 employees as you did when you had six employees. This will ultimately create bottlenecks. This mentality has helped us make more informed decisions by maximizing an employee as a resource.
3. You will also probably identify a few tasks that can be eliminated or areas to be more efficient. One of our team members identified that based on the average salary of our employees, a team meeting can cost upwards of $2,000, so we learned to use that time more effectively.
Examples for Cost Reduction?
1. Get multiple bids for projects to ensure we are receiving the lowest cost.
2. Eliminating subscriptions that aren’t currently being used or have a cheaper option.
3. Simply asking the supplier if this is the lowest cost. You will be surprised at the discounts you can receive if you just ask!
Examples for Revenue Generation?
1. If we have a vacant property, we offer a referral bonus to the person that brings in the lead, so our properties aren’t sitting vacant.
2. Identify a service you are currently paying for but could instead bring in-house (for us, that was Property Management).
We hope this helps you understand how we’ve implemented C.O.R. at Fort Capital, so you too can develop this successful business model. If you want to learn even more, check out this podcast episode.