Underestimating Intangible Values during Cost Cutting
Intangible value is hard to measure. So often it is not measured. False conclusion: no measured value = no value.
I observe the following pattern:
- The primary method to increase profitability is reduce costs.
- Experienced experts are expensive. In my area the "products" created by them are intangible (e.g. competence).
- The value of intangibles is not measured in the same units as the costs (€). So managers cannot do an easy cost/benefit calculation.
- Astonishingly this leads to the assumption, that intangibles have little monetary value.
Typically experienced (= long time) experts build an extensive network. Part of their effectiveness is caused by their networks support in
a) quickly getting expert consultation,
b) quickly reach a agreement + decision due to mutual trust and understanding
c) quickly getting small things done as personal favors (give and take!)
It is a common habit now to replace these experts with low cost resources.
And then the management is surprised, that profit decreases, despite of the reduced costs.