The Measure of Efficacy of Spend is Value Adding | Bill Waddell | Manufacturing Leadership Center

Lindsay Levkoff Lynn
Lindsay Levkoff Lynn

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“A writer by the name of Lindsay Levkoff Lynn asserts that a charity should not be measured on the basis of the percentage of its money that goes to the cause for which it exists.  “We cannot measure efficacy of spend by looking purely at the ratio of overheads to programme costs,” she says.  I was curious as to how someone could not just be wrong, but absolutely, totally, dead wrong about such a subject …. and then I learned that she is a former Bain consultant with a Harvard MBA and it made more sense.  Fundamental lean principles are simply not part of her intellectual make-up.

In fact, the percentage of their money that goes to creating value for customers is the overarching measure of not just charities, but every organization.”

Michel Baudin‘s insight:

While I agree with Bill on measuring a charity by the percentage of its money that goes to the cause for which it exists, I don’t follow him in when he chides Levkoff Lynn for saying that P&G is not purely a manufacturing business but also a marketing giant.

While I am not familiar with P&G, I have consulted in the past for a competitor of theirs in detergents and personal products, and was told that, in this business, if you stop promoting a brand, it dies in six months. I don’t know whether this hypothesis has ever been tested, but the managers held it to be self-evident.

Even is you own a well-known brand in a mature market, you must keep advertising it, offering special discounts, and including toys in boxes. It is a massive direct expense, and it affects the manufacturing process, because the promotional materials are actually more difficult to procure and  have longer lead times than the raw materials used to make the product.

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