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, encourage participation. The people best positioned to determine how to be more efficient are your managers and staff. However, in most organizations there are many 'barriers' that prevent their ideas from being surfaced and considered. The organizational structure itself and the 'silos' that people work in both contribute to these barriers. Putting a process in place that encourages managers and staff to participate and collaborate to develop ideas for improvement is central to achieving your objectives internally. The process should also drive ideas through to decision making and implementation. Our experience is that organizations are completely capable of generating hundreds, even thousands, of good ideas that can result in dramatic financial impact.
Second, use software to organize the effort. When we interview managers responsible for these efforts, they tell us that organizing the effort is one of the most frustrating aspects of their assignment. Typically, all those working on a cost reduction effort are doing so in addition to their regular responsibilities. As the number of projects grows, the ability to keep track of issues, progress, and financial impact is critical. Organizations typically turn to familiar tools, like Microsoft Excel or Project. However, this software is not designed to manage these types of efforts, and those responsible for project coordination, typically the CFO or someone in the CFO's organization, grow frustrated with the need to gather, check, and integrated spreadsheets that get increasingly complex over time. Finding the right software tool to assist the organization is an important element to achieving your financial objectives.
Third, build an organizational capability. If all you do is cut costs, the organization will look back on the effort as a negative event. However, if you reduce your expenses using a process that gets people involved and changes the way decisions get made, people will remember that this difficult period was one in which organizational capabilities were strengthened. At the right time, these same processes can also be used to grow revenue and support innovation.
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. - 15359
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, encourage participation. The people best positioned to determine how to be more efficient are your managers and staff. However, in most organizations there are many 'barriers' that prevent their ideas from being surfaced and considered. The organizational structure itself and the 'silos' that people work in both contribute to these barriers. Putting a process in place that encourages managers and staff to participate and collaborate to develop ideas for improvement is central to achieving your objectives internally. The process should also drive ideas through to decision making and implementation. Our experience is that organizations are completely capable of generating hundreds, even thousands, of good ideas that can result in dramatic financial impact.
Second, use software to organize the effort. When we interview managers responsible for these efforts, they tell us that organizing the effort is one of the most frustrating aspects of their assignment. Typically, all those working on a cost reduction effort are doing so in addition to their regular responsibilities. As the number of projects grows, the ability to keep track of issues, progress, and financial impact is critical. Organizations typically turn to familiar tools, like Microsoft Excel or Project. However, this software is not designed to manage these types of efforts, and those responsible for project coordination, typically the CFO or someone in the CFO's organization, grow frustrated with the need to gather, check, and integrated spreadsheets that get increasingly complex over time. Finding the right software tool to assist the organization is an important element to achieving your financial objectives.
Third, build an organizational capability. If all you do is cut costs, the organization will look back on the effort as a negative event. However, if you reduce your expenses using a process that gets people involved and changes the way decisions get made, people will remember that this difficult period was one in which organizational capabilities were strengthened. At the right time, these same processes can also be used to grow revenue and support innovation.
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. - 15359
About the Author:
George Swetlitz is the founder and Managing Partner of Insight Results LLC, a management consulting firm that works with organizations of all sizes 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.
