Cost Control and Cost Reduction
Delivering successful cost reduction programmes
In the current economic climate, most organisations must face up to a prolonged period of extreme competition and funding restrictions. This is particularly the case if the past few years have been focused on growth, service improvement or reorganisation (i.e. cost efficiency has not been a recent priority). Such pressures require an approach that reduces costs in a strategic, disciplined, and sustainable manner - delivered at pace.
In our view serious cost reduction is far more than a loose aggregation of individual, local activities. It is also more than a finance task, an operational task or a localised process mapping task. In our experience, successful cost reduction requires a programme approach, managed in full alignment with the corporate strategy, across all areas of the business. It relies on an educated, intelligent debate that recognises the need for change, the appetite for change and the ability to change.
Cost reduction is a challenging, high risk activity.
It must be recognised that cutting costs is a challenging, high risk activity, that executed badly can at the very least fail to deliver, and at worst significantly undermine an organisation's business goals and service integrity. Once there is the recognition that significant cost reduction is necessary, there are a number of pitfalls organisations should avoid:
Approach
Draconian Top Down Reductions. Indiscriminate, arbitrary reductions, normally in staff or high profile projects, must be avoided. Such action is often driven by a desire to be seen to act, (“We must do something – lets do this now”), without taking into account downstream impact, wider dependencies or strategic impact.
Inadequate Buy-in. Insufficient input, involvement and buy-in by employees who are best placed to identify savings and will later have to achieve them.
Design
Over Analysis. Prolonged analysis of the opportunities, even on the obvious quick wins. Analysis
In the current economic climate, most organisations must face up to a prolonged period of extreme competition and funding restrictions. This is particularly the case if the past few years have been focused on growth, service improvement or reorganisation (i.e. cost efficiency has not been a recent priority). Such pressures require an approach that reduces costs in a strategic, disciplined, and sustainable manner - delivered at pace.
In our view serious cost reduction is far more than a loose aggregation of individual, local activities. It is also more than a finance task, an operational task or a localised process mapping task. In our experience, successful cost reduction requires a programme approach, managed in full alignment with the corporate strategy, across all areas of the business. It relies on an educated, intelligent debate that recognises the need for change, the appetite for change and the ability to change.
Cost reduction is a challenging, high risk activity.
It must be recognised that cutting costs is a challenging, high risk activity, that executed badly can at the very least fail to deliver, and at worst significantly undermine an organisation's business goals and service integrity. Once there is the recognition that significant cost reduction is necessary, there are a number of pitfalls organisations should avoid:
Approach
Draconian Top Down Reductions. Indiscriminate, arbitrary reductions, normally in staff or high profile projects, must be avoided. Such action is often driven by a desire to be seen to act, (“We must do something – lets do this now”), without taking into account downstream impact, wider dependencies or strategic impact.
Inadequate Buy-in. Insufficient input, involvement and buy-in by employees who are best placed to identify savings and will later have to achieve them.
Design
Over Analysis. Prolonged analysis of the opportunities, even on the obvious quick wins. Analysis