In this economic environment, many companies are considering or implementing broad actions to reduce spend and streamline organizational design and processes. While these types of projects are never pleasant, if done correctly, they can not only help you achieve your immediate cost reduction objectives, but create an efficient platform and new capabilities that will create a competitive advantage for you when market conditions rebound.
In this article, we won't be addressing how you determine your financial objectives. Whether you focus company-wide, within specific functional areas, set percentage targets or vary those targets by area, there are three things that your organization can do to maximize the value of any effort undertaken:
First, involve the organization. The largest source of untapped knowledge is hiding in plain sight -- your managers and staff. There are many reasons why good ideas don't get surfaced and implemented. Putting in place a solid process to identify those ideas, build consensus around them, and get decisions made quickly is critical to achieving your financial objectives. We have worked with organizations that developed hundreds, even thousands, of good ideas internally, resulting in extraordinary financial results.
Second, use the right software. Microsoft Excel is a great tool. It's also probably one of the most overused tools as well. Your organization needs the ability to track status, understand realized savings vs. target, identify problems early and generate roll-up reports without having to request, track, maintain version control of, and consolidate reports from across the organization. In our experience, this is one of the biggest frustrations that people responsible for coordinating cost reduction efforts have. Typically, everyone involved is working on cost reduction in addition to their full-time jobs. Using static tools like Excel doesn't help much when senior management wants a status update tomorrow morning.
Third, learn from the experience. The elements of the cost reduction process -- generating ideas, building consensus around the best ideas, and tracking implementation -- can be used to manage revenue growth and innovation as well. If an organization puts in place the building blocks for a well-run cost reduction effort, they are also putting in place the building blocks for an ongoing performance improvement capability. In fact, whether or not an organization creates a capability is central to how managers and staff will evaluate the cost reduction program in the future.
It is not uncommon for companies to complete an expense management initiative with poor morale, cuts that many would argue are too deep in all the wrong places, and processes that haven't changed to reflect reductions in personnel.
However, done well, managers and staff will see that things really changed and that the company has new capabilities. These capabilities give the organization a voice and lead to a continuous improvement process in which everyone can participate. This should be the goal, and it is achievable. - 15246
In this article, we won't be addressing how you determine your financial objectives. Whether you focus company-wide, within specific functional areas, set percentage targets or vary those targets by area, there are three things that your organization can do to maximize the value of any effort undertaken:
First, involve the organization. The largest source of untapped knowledge is hiding in plain sight -- your managers and staff. There are many reasons why good ideas don't get surfaced and implemented. Putting in place a solid process to identify those ideas, build consensus around them, and get decisions made quickly is critical to achieving your financial objectives. We have worked with organizations that developed hundreds, even thousands, of good ideas internally, resulting in extraordinary financial results.
Second, use the right software. Microsoft Excel is a great tool. It's also probably one of the most overused tools as well. Your organization needs the ability to track status, understand realized savings vs. target, identify problems early and generate roll-up reports without having to request, track, maintain version control of, and consolidate reports from across the organization. In our experience, this is one of the biggest frustrations that people responsible for coordinating cost reduction efforts have. Typically, everyone involved is working on cost reduction in addition to their full-time jobs. Using static tools like Excel doesn't help much when senior management wants a status update tomorrow morning.
Third, learn from the experience. The elements of the cost reduction process -- generating ideas, building consensus around the best ideas, and tracking implementation -- can be used to manage revenue growth and innovation as well. If an organization puts in place the building blocks for a well-run cost reduction effort, they are also putting in place the building blocks for an ongoing performance improvement capability. In fact, whether or not an organization creates a capability is central to how managers and staff will evaluate the cost reduction program in the future.
It is not uncommon for companies to complete an expense management initiative with poor morale, cuts that many would argue are too deep in all the wrong places, and processes that haven't changed to reflect reductions in personnel.
However, done well, managers and staff will see that things really changed and that the company has new capabilities. These capabilities give the organization a voice and lead to a continuous improvement process in which everyone can participate. This should be the goal, and it is achievable. - 15246
About the Author:
George Swetlitz is the founder and Managing Partner of Insight Results LLC, a consulting firm that works with companies on cost reduction initiatives. Visit the Insight Results website for more information on effective cost reduction initiatives or to see a video of e-Impact, our program management software.
