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Some views on cost management


1. Some enterprises have no motivation to do cost management at all. Why?

Any management must follow the principle of cost-effectiveness in decision-making, either explicit or implicit. China is the world's factory, and its cost is unmatched. But we feel that our cost management is not in place, which seems to be full of contradictions. My understanding is that our cost spillover effect is so large that enterprises have no incentive to improve costs through management, such as environmental pollution, underpayment of pensions and tax evasion. Due to the lax law enforcement environment, a lot of costs that need to be borne by the enterprise spill over to the outside of the enterprise and are borne by the society or the public.

Another important reason is our financial environment: it is too easy for us to obtain funds, which leads to no incentive to implement refined management. What we need to do is to enlarge the balance sheet, rather than improve the efficiency of the existing balance sheet (as the old saying goes, "enlarge" rather than "strengthen"), so as to solve the cash flow problem. Lean management itself pays attention to the harm of unreasonable inventory backlog to the cash flow of enterprises, but when enterprises can easily obtain the external cash flow, do they have the motivation to improve the use of existing cash? (in addition to traditional bank lending, the methods for enterprises to obtain external funds also include IPO, private lending, triangle debt, Laolai and other ways to inflate the balance sheet and off balance sheet financing.)

2. Some enterprises want to do it, but can they take the first step? Why?

For these enterprises, I don't think I can find a handle. Management is a practical art. Only through practice can management talents become true professional managers. China's business and management circles seem to lack a sense of principle oriented theory. For the most typical ones, such as the current accounting standards and auditing standards, many professionals can't understand them.

Western management theory is also principle oriented. In practice, if there is no such apprenticeship system of master and apprentice, it may be difficult to cultivate real professionals. More than 30 years of reform and opening up, foreign investment has indeed cultivated a number of talents for China. However, the characteristics of China are that there are obvious boundaries among the three sectors of foreign capital, state-owned capital and private capital, and the flow of talents is basically one-way oriented. Therefore, as a whole, professional managers are mostly concentrated in foreign enterprises, followed by state-owned enterprises, followed by private enterprises (of course, different situations may occur in specific enterprise levels).

3. Some enterprises did, but failed. Why?

Most management tools are imported from the West. For a seed to grow into a tree, it needs seeds, soil and gardener. Whether in theory or practice, the focus may be on that seed, ignoring the soil and gardener. For example, profit sharing plan is needed to encourage employees to participate in the change, environment that needs authorization to tolerate trial and error, and a certain number of employees need to master relevant knowledge, etc. In terms of academic language, it means how to localize theory and practice it.

To sum up, there are many constraints that can not be solved from the financial perspective, which requires the theoretical and practical circles to change a mindset and consider how to use some management tools from a more pragmatic and systematic perspective. For the publishing industry, while introducing some western theoretical works, we can pay more attention to the gain and loss experience of domestic enterprises in the process of using these management theories. I think this will better promote the overall improvement of China's management level.

When we introduce a management theory (or tool), we need to ask the following questions first:

1) What is the background of this theory? (such as which event, which experiment, etc.). What is the problem that theory hopes to solve?

2) What are the premises of this theory? (including the conditions of the whole society and the individual enterprises)

3) Which enterprises have gone through the practice? What is the effect of practice? In the course of practice, what amendments have been made to the original theory? Why should we fix it?

4) What prerequisites and assumptions apply to us? Which do not apply? Why?

5) What are our own characteristics that may affect the application of the theory? How to use positive impact? How to overcome the adverse effects?

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