Often, when a business starts to think about its costs and improving or maintaining its margins, cost control can take precedence over cost management.

Cost control is often seen as the reduction of absolute costs. This can be done without reference to the context in which the costs are incurred and in the pursuit of an income stream.

There is a ‘law of unintended consequences’ in economics theory that tells us that our actions will not only have the consequences we plan, but will also give us other positive or negative consequences that we had not envisaged. Anyone who has worked for a large organisation through a period of change and when departments or people have become redundant will have found themselves asking, ‘Well, who is going to do this important task now?’. Often, we find old ways of working creeping back in because the change, which was carried out with the intention of an overall positive outcome, has not been thought through carefully enough.

Cost management is a better concept. It encourages us to look at the costs we incur in the context of increasing profit and with an eye on maintaining income. It asks us to think about improving productivity and removing unnecessary costs, rather than looking at absolute costs. The aim of cost management is to reduce costs, but it also includes maintaining income and capacity.

The gains from reducing costs should always be weighed up against any potential negative consequences and lost opportunities. For example, if you reduce your staffing costs through redundancy or natural wastage, will you still be able to cope with sickness and holidays, and will you have the capacity to take up an opportunity to provide a new service being offered locally?