Intelligent Cost Reduction - Practical Overview

  " My experience of working with a number of organisations is that even where there are contractual arrangements in place, there is inevitably a level of off-contract spend, and where there are no corporate contracts in place expenditure is likely to be uncoordinated and uncontrolled. There are a number of ways to address this - but by far the most effective is by implementing a demand management programme. This can be as small or large as the organisation wishes, and always depends on the level of control the individual client is willing to support in reducing maverick spending. Even when a good value contract is in place, challenging and monitoring demand for its use will result in cost reductions. This approach can be implemented with very little resource required, and can deliver results without affecting front line delivery of goods or services. This also avoids ‘salami slicing’ teams, losing experienced and mission critical staff and demonstrates that the organisation is really looking to support its stakeholders by not taking the easy option of reducing staff numbers or cutting ‘soft’ budgets such as marketing and training. It does not have to be an expensive process, for example one organisation recently invested £55k in external expertise and returned an annual repeatable saving of £1.58million - that's not a bad return on investment!   "

  " How many times have you walked into an office and seen key staff making their own travel arrangements or working on their expenses? It’s something almost everyone can relate to, where highly skilled (and expensive) people are bogged down in administration and are simply not playing to their strengths. By ensuring each task is being performed by the appropriately skilled resource at the lowest cost base, you can increase the quality and volume of activity, while simultaneously improving staff engagement and retention. For example, I’ve achieved this in the insurance industry through releasing the lowest performing underwriters and sales people, and replacing them with back office staff to ensure expensive and highly skilled people focus on what they do best – facing clients and creating revenue. Key to this was identifying what processes were and weren’t working, analysing the skill set each person was recruited for and building controls into work allocation. This wasn’t a complicated exercise; by simply talking through a typical week it soon became clear where efforts were best spent. You also need to build a closer relationship between front and back office staff because trust and engagement is vital. This requires sharing the frustrations experienced by each side, re-allocating tasks based on aptitude and linking the change with personal benefits. This all results in greater productivity and happier employees, of course not forgetting the desired cost reductions or a platform for growth – a situation we can all aspire to.   "

  " People old enough to remember the recession in the mid eighties will recognise that the organisations that failed were the ones who didn’t take a holistic view of their assets or take into account the value of their human capital - they threw out the proverbial baby with the bathwater. I remember one complex programme that I worked on, where over a thousand years of experience walked out of the door when a group of older members of staff took early retirement. It almost crippled the organisation. A great counter to this is to create a learning organisation where knowledge management is built into everyday processes. A great example of this is the nuclear industry where a swathe of highly skilled and experienced 55-65 year olds are due to leave before the next nuclear build programme comes along. They need to transfer that intellectual capital back into the business; Sellafield are leading the way in this, sending teams around the world to gather best practice in knowledge capture. Knowledge management, organisational learning and intelligent cost reduction are all key subjects that the CEO and Senior Management Team must understand in order to position their organisation for future high performance. These are essential skills that Practicus can apply across all sectors.   "