Cost Management as an Ideology
At TEOCO, once every few years, we review the purchase of all our office supplies: the stationery, the copier maintenance, and even our Friday morning bagels. We invite fresh bids and try to identify new vendors. All this, just to ensure that we don’t pay any more than we should.
This is the sort of mindset that flows through the veins of everyone at TEOCO. Let me explain by means of an – apocryphal – example. Let’s suppose a TEOCO vice president has invited a business associate to dinner and talk at the table veers to a discussion on good French wines. I am fairly sure that our TEOCO vice president would choose to surprise his guest by calling for a good bottle of wine – but I am certain that he won’t call out for a $500 bottle – even if TEOCO can afford to pay that kind of money!
That is simply not the TEOCO way. I know of so many companies ruled by the ‘entitlement mindset’, where there is unreasonable pride and glee in earning and exploiting company perks. At TEOCO, we don’t allow such thoughts to invade our minds – everyone at TEOCO is an employee-owner, and we expect them to spend the company’s money exactly the way they would spend their own money.
One might imagine that this focus on cost management would become a sore point and cause much derisive humor within the company’s corridors. Rather surprisingly, that is not the case. Most employee-owners respect the principle and practice it out of choice, not compulsion. It even contributes to the bonding and camaraderie between TEOCO employee-owners.
We think cost management all the time: when we buy hardware, lease office space, renew our telecom contracts, recruit new employees, plan business travel, and even when we manage something as straight-forward as employee insurance.
We make sure to focus on the details and read the small print very carefully. For employee insurance, the easiest way is to opt for the ‘fully insured’ option: you simply negotiate an attractive premium rate and move on. But, of course, that would not be TEOCO’s way. We explore all options, and every nuance associated with these options. We visualize various scenarios and undertake a worst-case analysis. For medical insurance we eventually figured out that a self-funded plan, with re-insurance for catastrophic claim risks, was the best way to go forward.
Our savings from this insurance plan is not very significant; perhaps $200,000 every year. But, over the years, the savings add up. And as you learn how the process works, you discover more opportunities to save on costs. You could, for example, see if you can whittle down the broker’s fee, or avoid buying ‘aggregate risk’ re-insurance.
All this cost management effort used to take quite a bit of my time. One can reasonably ask: “Is it really worthwhile for the CEO to spend his time trying to save small pennies?”
My answer is yes; not for the handful of pennies that we save in an individual instance, but because the message – that TEOCO cares about every cost – seeps down and becomes a part of the company’s ethos. It’s this cost management discipline that has allowed TEOCO to remain profitable in good times and bad, including over the last twelve months during the COVID-19 pandemic.
With special thanks to Srinivas Bhogle for his support and contribution to this project.