Cost reduction

• Introduction

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  In the current economic climate, most organisations are facing up to a prolonged period of increasing competition and significant funding challenges.  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).  Addressing these pressures require an approach that reduces costs in a strategic, disciplined, and sustainable manner - delivered at pace.

• Further information

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  We strongly believe that serious cost reduction is far more than a loose aggregation of individual, local activities often managed at departmental level. 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. 

  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. Our approach is built around the establishment of programmatic change, delivered through a high performance central programme team, working through a clear eight stage end-to-end process. 

  There are many methodologies available in the market place for cost reduction, but all too often these are focused on content creation and not the management of the lifecycle, i.e all the way through to delivered and audited cost savings. The key, in our mind, is to ensure that the process starts early enough by linking into the corporate strategy, and finishes late enough – through to when benefits have been delivered, audited and sustained.

  1. Review Corporate Strategy - Update and understand the relevant elements of corporate strategy for the cost reduction programme.
  2. Establish Cost Base - Build a high level understanding of the organisational cost baseline, captured in a common definition and format. 
  3. Set High Level Targets - Establish the operating and capital spending targets, that meet the senior stakeholder requirements, yet remain feasible in reference to the actual cost base.
  4. Map and Assess Cost Drivers - Create a detailed cost dataset and associated cost drivers metrics, to allow insightful analysis of the organisational efficiency
  5. Identify Current and Potential Initiatives - These can be identified from internal debate, cost driver data crunching, external benchmarking, and external best practice review.
  6. Prioritise & Optimise Initiatives - Filter, categorise, refine the initiatives, prioritise on value, timescale, risk and then optimise overall portfolio. This recognises that the previous step will in all likelihood identify many more initiatives than can realistically be managed.
  7. Manage, Deliver & Audit - Initiative delivery, progress reporting, programme assurance, cost reduction audit.
  8. Sustain & Adjust - Sustain the cost reduction savings post-delivery. Ensure the organisation learns and adjusts from the programme delivery. This approach has been built from the Moorhouse team's experience in delivering complex programme change, including cost reduction programmes, across many sectors.