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Usually, wisdom dictates that you have to spend money to make money. Still, too often, businesses make the mistake of going overboard with a cost-saving measure that backfires on them badly. Here are a few stories of times companies paid the price for their greed.
Per Diem
Speaking of thrifty people, here’s an example where intelligent employees gamed the system for extra cash, but their employer didn’t appreciate their ingenuity. Finally, an amused employee explained how employees at the company got a travel per diem.
According to the employee, they would take advantage of the hotel’s complimentary breakfast, buy a cheap lunch that could be split into two meals to take care of dinner, and then keep the rest of the money. The per diem was theirs, so they figured they could do what they wanted to do with it. In this case, what was good for the goose was not good for the gander; however, the employees got the last laugh.
Routine Maintenence
This user tells the story of how management decided, seriously, to only fix part of the roof of the building. Yeah, that wasn’t a good idea. He stated the building’s roof was leaking horribly.
He said he got two quotes to fix the damage, one to fix a third of the roof and one to replace the entire roof. Of course, the company’s management chose the cheaper route and only fixed one-third of the roof. What happened? Well, the leak was still there. It was just leaking in a different spot.
Oops!
Talk about shooting yourself in the foot. You can imagine this former employee shaking their head sadly at the company that set itself up for a lawsuit. When another employee told the story of how the company they worked for decided to deduct money from an employee’s pay, it was a terrible idea.
The company asserted that since the employee neglected to complete a task, it was their fault, and they owed the company money to make up for the mistake. The employee didn’t see it that way, got a lawyer, and filed suit. They came in hard legally and took the company to court.
Outsourcing For The Win
This common practice became a bigger hassle for more than one company. Here’s just one example of how stinginess can come back to haunt you. One company outsourced its call center to South America after gaining a large and faithful customer base for remaining in the United States.
That move ended all of the customer goodwill, and they lost a third of their customer base within two years. As a result, the company is barely in business now and may go out of business soon.
Temp Work
One contributor had a fantastic but long story about how the management’s contempt for the workers they considered unskilled labor cost them a pretty penny. For example, a company with a distribution center didn’t think that the warehouse employees, known as pickers, were skilled labor even though they kept the business going with their skills.
Management suddenly decided that the incentive pay program, which rewarded them for their work, was costing too much and making too much money, so he canceled the program and then increased the percentages they had to meet daily. In a few months, with truly unskilled labor in the warehouse that caused errors in the delivery chain, the company started hemorrhaging customers and sales staff, costing the company millions of dollars.
Moldy Ideas
Mold is an environmental issue in buildings, and it is hard to correct on it takes hold. It can give employees long-term health problems and damage the structures. But that didn’t stop the management of this company from trying to pinch a few pennies.
One frustrated employee said that the company they worked for had the bright idea to shut off the HVAC system to save on electricity costs during the summer. As a result, the company was forced to pay over half a million in mold remediation costs. That’s pure genius at work.
Spend Money To Make Money
One rule of business that is less well known is that you need to have enough money to pay the company’s expenses, or you shouldn’t be running a business. Regulations are laws for good reasons. But this employer didn’t think so and got burned.
For example, the boss at one user’s company was known to be a cheapskate, always trying to avoid paying for licensing and following regulations whenever possible. It wasn’t until the boss refused to pay $5,000 for a license to operate in particular states that their suppliers cut our contracts.
This caused the loss of hundreds of clients, and the company lost hundreds of thousands of dollars in revenue because the company refused to pay that one relatively small fee.
Firing People Impulsively
This tale of a Fintech company that sent its jobs to India had a typical and unpleasant result. To make matters worse, they expected the employees who would be fired and replaced by the new Indian employees to train their replacements for three months.
Fast forward to a month after the employees were released, and the company desperately tried to rehire them. From a legal standpoint, it would have been a 12-month contract because they had already been issued a severance package, but nearly every employee told them no.
You Did What?
This terrible decision should win a medal at the awards ceremony for bad ideas. The management at this particular company stopped giving raises to lower-level staff, who were highly trained in the company’s processes and procedures and very valuable to the organization but not valuable enough to be adequately paid.
Most of the staff had been at the company for many years and had a depth of experience that made the company successful. But after they discovered they would be denied raises in the future, they left the company.
Club Night
You would think that skimping on security would be the farthest thing from a nightclub owner’s mind, but, in this case, the owners unwisely decided that security was not a priority.
While the owners realized a profit of about $45,000 a week, they refused to buy radios for the security staff to communicate, leading to many unpleasant incidents. Without a proper number of security guards, they were fighting a losing battle every night.
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