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, 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.
Many companies suffer as the result of a poorly executed cost reduction effort. While they achieve their financial objectives, morale declines, cuts go too far into organizational muscle and processes don't change. People just work harder.
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. - 15431
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, 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.
Many companies suffer as the result of a poorly executed cost reduction effort. While they achieve their financial objectives, morale declines, cuts go too far into organizational muscle and processes don't change. People just work harder.
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. - 15431
About the Author:
George Swetlitz is the founder and Managing Partner of Insight Results LLC, a consulting firm that works with companies on performance improvement 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.
