Preventive vs corrective approaches in management

For example, sales may drop from last month, unexpectedly high selling and administrative expenses can be observed, inventory holding time is on a rising trend, and so on.
 The review and analysis of financial results may disclose problematic areas from an operational viewpoint. Consequently, a set of actions and responses needs to be developed to cope with the new challenge resulting from unexpected situations and uncertainties, or to resolve the encountered problems caused by either internal or external factors. This may ultimately lead to planning for both corrective and preventive actions.
Corrective actions can be mistakenly accepted with the mindset of getting a problem fixed when it occurs, just like the saying, “if it ain’t broken, don’t fix it”. This type of thinking may lead to a weak emphasis on investigating the root cause to prevent a recurrence. However, someone may argue that at least it is much better than seeing problems being ignored by responsible persons. To fix a problem after it happens can be both time-consuming and costly. This is why preventive action is worth considering as a preferred approach.
Preventive actions can be incorporated into any kind of business including manufacturing, service and so on. They can be adopted for any functional operation, not just the repair and maintenance of parts. The practice of planning ahead can be useful in several situations, for example:
lPlanning for regular machine and equipment maintenance;
lEnsuring that critical spare parts are available all the time;
lCommunicating with concerned people to reach the same understanding about the new product development plan;
lPlanning for the key successors;
lFilling people in the new organisation before the commencement of the business operation, and so on.
A simple activity like painting the building after a long period of time is considered an important maintenance practice. This not only helps preserve the asset longer but also helps make the business look good with a beautiful image. In many cases, failing to perform preventive measures can result in high damage such as an accidental fire from broken-down electrical equipment or production line shutdown from machinery repair.
Comparatively speaking, taking corrective action can be more costly than preventive action, especially when the problem keeps repeating itself. It is not unusual to see employees keep on fixing the same problem as part of their routine work. This is considered operating waste that should be eliminated. For example:
Why don’t many people pay enough attention to preventive actions? There might be a number of reasons why a preventive approach cannot overcome a corrective approach.
lIt is not urgent. When people cannot feel the impact suddenly, the responses seem to be easily postponed. The sense of urgency becomes an important factor in determining when to take preventive action.
lThe financial return is not evident. When spending money on prevention, the financial return may not be measured directly, causing the decision maker to hesitate.
lComplacency. When a business is running normally, it is hard to get attention from members for an unexpected incident. A risk-aversion mindset should be enhanced in operations.
lLimited resources. Budget allocation during a financial squeeze can push preventive projects to the future. However the consequences of this decision can be more than what was estimated. From the longer-term perspective, the business planning process should not ignore important things like strategically preventive actions. This should be addressed as part of total business strategy formulation.

Yanyong Thammatucharee is a senior vice president for accounting and finance at Central Marketing Group. |He can be reached at yanyong|[email protected]