In the Black

A budget-savvy executive advises on staying competitive in an economic crunch

01WP-P-Holloman1aEXCJ. PHILLIP HOLLOMAN

Title: President and Chief Operating Officer, Cintas Corp.

Location: Mason, Ohio

Age: 53

Power Play: In three years as vice president of distribution, he turned the Distribution Division from operating $8 million in the red to operating $3 million in the black.

In light of the struggling economy, many companies are trying to find ways to save money. What strategies can you recommend to cut costs without hurting the bottom line?
The companies that are most profitable are the ones that have eliminated non-value-added work. What improves operation profit as a percentage to sales is work that produces output that the customer notices and is willing to pay for. You should challenge your employees to seize these opportunities, and cost savings will follow. Minimize all capital expenditures, scrutinize all expenses, and be vigilant about collecting accounts receivable. Cintas is being very aggressive in looking for opportunities to expand our market share so that we are prepared when the economy strengthens.

What corporate areas should be looked at first when making the decision to cut costs?
Do not take short-term cuts with your customer that will have adverse long-term effects. Make sure you take care of your customers by providing quality service that they can depend on. Make sure you endear your customers to the value proposition that you provide to them. Tighten your criteria for approving capital expenditures; make sure you are leveraging your purchasing power; conserve all forms of energy utilization; cut back on the frills associated with various informal businesses; reduce non-essential travel; and eliminate non-essential data collection and reporting. Overall internal reporting on various key performance indicators [KPIs] and trend information has proliferated. By reducing reporting on it, not only will you decrease non-value-added work, but employees can shift more from an internal KPI focus to an external customer focus.

How do you “sell” cost cuts across the organization?
Make sure your employees understand that we’re going through tough times economically and cutting costs helps retain jobs and benefits. Get your people to understand the big picture so that you come out as strong as possible once the economy strengthens. Engage your employees at all levels to participate in the process of generating ideas on how to cut costs. Don’t make this just a top-down exercise, but also encourage bottom-up participation. It’s also very important for upper management to “walk the talk.” For instance, you can’t tell your employees to eliminate all non-essential costs and then host an extravagant meeting.

One of the challenges for the COO is to balance short-term strategy with long-term vision. How do you continue to invest in innovation while managing the bottom line, particularly in tough economic times?
Part of the corporate culture at Cintas is to do what is right, not what is expedient. We do not take short-term gains at the expense of long-term values. During these tough economic times, we want to take every advantage to expand our market share. When our competition cuts back services or shuts down plants, we want to be ready and willing to offer our services to those affected customers. We will always continue to look for opportunities for innovation, but may exercise more scrutiny when determining which innovations will produce the best long-term value.

This article originally appeared in the January 2009 issue of Black Enterprise.

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