With increasing competition and the worsening economy, maintaining profitability remains a primary concern among many organizations. I have witnessed this phenomenon firsthand during a twenty-three year career with Company X, a large, Midwest-based insurance company. However, I often wonder whether the strategies employed by Company X and others like it really represent the best approach to surviving the challenges presented in today's business world.

"Expense Management" has become a prominent buzzword in recent years. While this term has always struck me as a rather euphemistic way of referring to what is, in reality, cost cutting or expense reduction, the concept itself is not an entirely invalid one. Utilizing resources wisely and efficiently, eliminating redundancy and avoiding waste are all legitimate methods for achieving budgetary goals and ensuring profitability.
The problem however, occurs when expense management strategies are implemented in ways that are incompatible with other company goals. This then has the unfortunate effect of impacting product quality, customer service and employee morale.

For example, Company X has long utilized a number of advertising campaigns and slogans which center around the idea of providing service to customers that is similar to the support that they might receive through the close, personal relationships enjoyed with others living nearby in their own communities. For many years the company's structure supported this idea well. By means of a network of local, independent contractor sales agents who were in turn supported by small, hometown claims service centers and a system of decentralized regional offices providing underwriting and other business support services, Company X continuously reinforced the notion that even a large, national organization could provide service in a way to make the customer feel that he or she was actually dealing with a "Mom and Pop" type organization, staffed by friendly people right in their own neighborhoods.

Maintaining this illusion was quite expensive, however with a tremendous amount of redundancy involved. Duplicating general departments such as Accounting and Finance, Information Technology and Human resources no less than twenty-eight times across the United States and Canada was clearly not an effective use of resources. So Company X very wisely embarked on a plan of consolidating or "right sizing" which entailed closing local claims service centers

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