Hard Dollar vs Soft Dollar Savings
Hard Dollars or Soft Dollars. Which is best? Both of those dollars represent a savings to somebody. Let’s discuss them in a little more detail.
Hard Dollars are dollars that you can actually see in a budget. These Dollars are savings that you can actually quantify either now or into the future. These are savings that a manager stakes their reputation on. Looking at this in a little more detail let’s review an example. How about I come up with an automation that can replace three individuals. Does this savings represent Hard Dollar savings? No. Unless one, two or three people leave the budget, this was not a Hard Dollar savings. A business may not want this Hard Dollar savings. The business may be better off by redeploying these three people to areas where they may be able to provide greater value.
Another example. This is a governmental agency that provides value to their constituents. The challenge this agency has is that 40% of their employees will potentially retire within five years. This is actually a great time to start thinking about Lean Six Sigma and Hard Dollars. As you ramp up a Lean Six Sigma program and start to make your business more efficient you will start to see a situation where retiring individuals do not need to be replaced. This is an example of a Hard Dollar savings because you no longer need to carry that individuals cost on the operational budget.
Soft Dollars are dollars that may show up in a budget but are difficult to impossible to quantify. Though it is difficult to quantify these Dollars it doesn’t mean that they aren’t just as important as Hard Dollars. Let’s review an analogy. When you implement a marketing program, how easy is it to correlate the dollars spent on the marketing program with increased business?
Another soft dollar example could be if a governmental agency implements an online business permit program that saves customers countless hours of back and forth with documents. This did not save the governmental agency a penny however, it will increase their reputation with the building community.
Hard or Soft Dollars
One is neither greater nor lesser than the other. It depends on what you are trying to accomplish.