Sticking to a frugal policy pays off for businesses

IKEA, other companies excel at doing more with less

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in Best-Practices Leadership,Centerpiece,Leaders & Managers

tighten work budget“If only I had a bigger budget (for my department or my company), all my problems would disappear.”

You’ve likely had a similar thought at some point. But is it true?

Great companies, and leaders, excel at finding a frugal path when solving problems. They resist the urge to throw more money at challenges and instead do more with less.

For example, IKEA’s leadership is determined to avoid spending unless they have to. The concept, called “lista,” comes from the Swedish word for “cunning.”

You could see lista in action when IKEA launched its “nine in eight” effort, in which nine stores in North America were designed, engineered and fully operational in just eight months. In the history of IKEA, it had never been done.

Sticking to its frugal philosophy, the company only used in-house resources—no extra consultants or project managers. A staff that had historically opened one store every few years added 3 million square feet of new stores.

Some leaders make frugality a cornerstone of their business. Herb and Marion Sandler, founders of World Savings, sparked innovation within their business by constantly asking, “What’s the good business reason for spending this money?”

Partially as a result of that question, the business ran with half the ­employees of the competition, with each staffer generating 40% more revenue than the industry average.

What’s your story of meeting a huge challenge with meager resources?

— Adapted from The Reinventors: How Extraordinary Companies Pursue Radical Continuous Change, Jason Jennings.

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