Businesses don’t always get cost-cutting measures right. Sometimes, they lack insight into the big picture and waste cash trying to save it.
While scrolling through one of my favorite Reddit subs, R/askreddit, I came across a unique question asking users to share the dumbest ways they’ve seen businesses throw money down the drain.
If you’ve ever worked in the corporate world, the answers won’t be shocking, but you can still shake your head at how horribly run many of the country’s companies are!
Not a New Roof
A leaky roof is one of the most damaging structural deficiencies of any dwelling. Roof leaks lead to water damage, mold, and ruined insulation. Therefore, it’s shocking to see companies cut corners when fixing a leak.
“The roof of our building was leaking bad. Got quotes for doing just a third of the roof and for doing a whole new roof. They choose to do third of the roof. All it did was move the leak. A month later, they did the whole roof. They would have paid a lot less had they done it right the first time,” shared one user.
The roof story led others to share more stories about companies losing money over poor maintenance.
“Intentionally putting off maintenance is one of the single dumbest “cost-cutting measures.” It’s such an obvious sign of a company about to go bankrupt or a company that has been bought by a hedge fund,” claimed one user, frustrated at the lack of foresight.
“Commercial kitchens,” said another, adding that they “use duct tape and prayers instead of doing routine maintenance on equipment. Then the equipment fails at a critical time, and new equipment has to be ordered and paid for as a top priority.”
Shutting off the AC
We get it; power is expensive. Summer AC in the hottest climates can be a budget buster for even the most financially stable.
One user shared that their company had the bright idea of shutting the AC off in the heat of summer to save on utility charges and quickly learned why it was a bad idea.
“Shut off the HVAC system to save on electricity costs during the summer. Had to pay over half a million in mold remediation costs,” they replied.
Poor decisions in heating can cost a fortune as well. “My parents used to own a b&b… they rented it out to someone who, in the (Canadian) winter, decided there wasn’t enough business to keep the heat on, so they turned it off to part of the place resulting in more than 100k in water damage from frozen pipes.”
Layoffs are often conducted as a last-ditch cost-saving measure, but some companies intentionally lay off their best and brightest to avoid paying them what they’re worth.
One user shared how this cost-cutting “good idea fairy” typically plays out.
“Lay off a bunch of veteran people so they can bring in newer workers for cheaper. They find they couldn’t bring in newer people for cheaper, so they hire newer people at close to the same price as the veteran workers.
“Veteran workers are mad they have to train somebody making almost the same as they are with no experience and start leaving. Company has to pay fewer remaining veteran workers even more to get them to stay while paying inexperienced workers close to what the workers they just laid off were making,” they stated.
The user added that workers were happy before the layoffs but said, “now the department is at a worse state and more expensive than what it was prior to their plan to save money.”
Businesses just can’t seem to understand that everyone’s lives would be easier if they simply paid employees what they were worth. Instead, they nickel and dime on wages, refuse to offer cost of living increases, and go all surprised Pikachu face when they’re short-staffed, claiming “no one wants to work anymore!”
“Underpaying the nurses, so they quit and had to pay agency 3x the going rate,” said one user, explaining how hospitals could have permanent, dedicated staff if they just paid their employees a reasonable wage.
Read Next: How to Handle Stagnant Wages
Micromanaging Business Travel
One user chose to nitpick a niche decision regarding business travel that can cost companies thousands if they don’t pay attention.
“Business traveler must fly to the closest airport to the destination,” they began. “Is Airport A one mile closer to the destination than Airport B? Yes. Are the airline tickets 2x as expensive? Also, yes,” they added.
“Hubby has been traveling for his work for 20+ years. The number of stupid rules that look like they save money – usually enforced by people outside the department – is jaw-dropping, “ shared another.
“The best/worst was when a company cut a deal with a hotel chain, so he had to stay at those locations. The $$ saved in room rate was washed out by $$$ car rentals, car ride services, parking fees, lost time commuting, missed flights, etc.,” they added, giving examples of the lack of foresight.
Poor Phone Support
Customers don’t like calling support lines, but providing an excellent customer experience is essential when they need to call.
One user shared that a company lost thousands of users after reneging on a promise to offer in-country phone support.
The company “moved “corporate” phone support from the UK to India for a very large fizzy drinks company, despite the contract saying guaranteed UK support,” they said, adding that “over 50k phones cancelled and moved to their rival.”
“This bit put HP on my boycotted companies list… way back in the day, they had domestic call center support that was great,” shared another user. “Then they outsourced/moved it all to India… quality of support went downhill fast. To a point where I have a feeling that the reps are incentivized by HP, or the center operating company to alienate and abuse customers,” they added.
Cancelling Incentive Pay
Some companies treat their employees well. They off bonuses and extra pay for a job well done, something workers appreciate and work harder to obtain.
However, sometimes the good idea fairy strikes, and a middle manager decides that incentive pay wastes money.
One user shared how a distribution center hurt itself by removing these bonuses from its warehouse workers. “They canceled the picker incentive plan and bumped up their quota, saying “it’s their job, we’re getting robbed paying them extra to do what they should be doing anyway!” the Redditor explained.
“Pick rates began falling sharply within the first week or two because the incentive pay for being an outstandingly fast and accurate picker made the otherwise crappy base pay for that job turn into a living wage. Warehouse staff was enraged by having their pay jacked with and now being unable to pay their bills while still being expected to perform as well as they did before, so they started performing to the old quota.
“Management did much finger-wagging and tried to write up a couple of the top pickers for “deliberately underperforming and hurting the company.” Those top-tier workers refused to sign the writeups, walked out of our warehouse, walked into the warehouse of our direct competitor, and had new jobs that same day. The rest of the high performers followed over the next couple of weeks,” they finished.
The company struggled to meet its delivery targets, resulting in angry customers, and the temp workers hired as replacements couldn’t keep up with demand. Ultimately, the company had to lay off most of its workers to avoid bankruptcy, all because someone didn’t want to pay staff what they were worth.
Outsourcing is one of the top cost-saving measures companies employ. With the rise of globalism and lower wages in developing countries, many see outsourcing as an easy way to save on labor costs.
However, sometimes outsourcing comes back to bite them.
“Someone I know worked for the “oldest American” hoist company.” shared one user. “They decided to outsource production to china. The cost of transport, losses, customs, etc. made the Chinese hoists just as expensive as their American-made ones, and then the Chinese company stole the plan to make and sell themselves for less.”
Outsourcing can also lead to poor-quality items. “There was a trucking company that engaged a Chinese manufacturer to make a bunch of intermodal containers. The prototype was flawless, so they ordered hundreds of them,” began one user.
Unfortunately, the quality wasn’t what the company expected. “They fell apart in a hurry,” added the user, describing poor-quality welds, lousy insulation, and thin walls.
We Don’t Need Spares
Companies using niche machinery should keep spare parts on hand in case of system failure. Those who decide the spares are unnecessarily expensive quickly learn that the cost of shutting down while waiting for delivery far exceeds the cost of storing a critical spare part.
“Our facility maintenance manager claimed a $300k savings by eliminating unnecessary capital spare parts in the warehouse,” shared one user. “Six months later, a critical compressor failed, resulting in the plant reducing to half capacity at a $500k per day profit loss. It would only take two days to repair; however, the parts were no longer in the warehouse. They were among those eliminated and sold for scrap. It took 90 days to receive replacements. Total loss to our company was just over $50 MILLION.”
Hopefully, that manager learned how vital keeping spares around really is!
What Ways Have You Seen Companies Waste Money?
The Reddit thread offered spectacular examples of companies showcasing their penny-wise pound foolish ways. It goes to show that even successful companies make poor financial decisions.
Have you seen better examples out in the real world?
Melanie launched Partners in Fire in 2017 to document her quest for financial independence with a mix of finance, fun, and solving the world’s problems. She’s self educated in personal finance and passionate about fighting systematic problems that prevent others from achieving their own financial goals. She also loves travel, anthropology, gaming and her cats.