Independent assurance is a valuable tool for executive boards to evidence that programme delivery of any type is in good shape and on track. For cost reduction programmes it can play an additional role in the assurance of the delivered financial results. That is, the sign off that programme activity has delivered tangible, sustainable cost reduction on a net group basis.

Achieving strategic cost reduction is always a challenge and has never been more relevant to organisations and programmes than in the current climate. Our experience has shown that successful strategic cost reduction can only be achieved through a programmatic approach, i.e. explicit programme governance and lifecycle management with clear programme definition, leadership, tools and techniques, organised through a clear programme structure. A critical element of this programmatic approach is assurance - assurance of the programme approach and critically, assurance of benefits delivery.

For any programme of scale, complexity and importance, the establishment of an independent programme assurance function supported by expert panels or equivalent is a critical investment that will deliver real value: value in alignment of outputs to realising benefits; value in reduced risk of failure; value perhaps in faster, more efficient delivery. This value is created through adopting a constructive approach which seeks to challenge and support a programme.

Challenge

In establishing a consistent basis for review, undertaken on an 'independent basis', the function can provide a transparent understanding of the programme status, and a mitigation against groupthink. The conclusions from the assurance reviews can be used as a comparator to the output of the mainstream reporting, risk and planning activity, to highlight any systematic differences of perception in status, risk, and progress. This consistent and regular review encourages key issues to be taken seriously, and ensures programme management elements are more than a tick box exercise. The emphasis must be on forming a constructive partnership.

Support

The function provides a mechanism for recognition and sharing of best practice within the programme. It provides the ability to reinforce the "big picture” and work to continually build a connection between the corporate goals and lower level activity. An assurance function provides an early warning opportunity, earlier than may become apparent in normal performance metrics, as it is looking just as much at the ability to deliver as delivery to-date. We have examples where an assurance initiative has proved a good predictor of progress and risk a year in advance. Assurance also allows project teams to raise issues and concerns outside of their direct remit, based on their observations and professional experience that can be of enormous value to the broader programme. Finally the one-to-one assurance process will often build confidence in the heart of the project teams.

Such assurance reviews have in our experience led to step change improvements in delivery success, identification of key programme and systemic risks, as well as enhanced external stakeholder perception of our client organisations' ability to deliver. This has often led to real financial savings, for example as a result of improved capital re-financing rates (e.g. lenders assuaged that robust management controls are in place) or faster implementation.

In a cost reduction programme, the decision making inputs and the delivery outputs are costs, and therefore more tangible and immediate than is sometimes the case, but equally more easily manipulated and obscured. Hence there is the need to assure the final quantification and sign off of the cost benefits realised. The key here is to prove that actions that are expected to produce cost reductions actually do lead to cost reductions, and importantly that they are not at the expense of other departments or cost categories, ie to confirm that they are net group reductions. So for example, the targeted headcount reduction of 10% is achieved (success!) but only by transferring the staff to a different department with a less challenging headcount target, or by hiring them back as temps or interim managers, no doubt at a higher rate; or by allowing the quality to drop to the extent that credit notes and rework costs rise significantly. Do not assume that the expected linkages between action and real cost reduction work, or that individual cost reduction activity is in the best interests of the overall organisation.

Another issue is the choice of baseline for reporting. The judicious selection of the baseline can often make all the difference between perceived success and failure. It is the task of the assurance team to ensure that the baseline is suitable, defined, understood and consistently used across the programme. The baseline itself should reflect the run rate adjusted for one-offs and known future short term changes and trends.

As key projects are completed, the cost benefits should be assessed and audited. The graph below shows how this might be tracked. This clearly has a strong interface with the financial and business planning functions, and it is essential that the interfaces between the projects and programmes, finance and “business as usual” are well managed and maintained.

Cost benefits - assessed and audited graph

In summary, operate a ring fenced assurance function, with direct reporting into the Programme Board, to provide ongoing and regular 'health checks' for the overall programme by examining and reporting on vital signs ranging from governance to reporting processes. This will include critical appraisal and sign off of the actual bottom line cost reduction realised for net group benefit.

Case study - Transport for London - Oversight

The Challenge

Transport for London (TfL) is the integrated body responsible for the capital's transport system. The TfL Investment Programme (IP) equates to a c. £12billion investment (£3.5 billion enabling 2012 Olympic transportation), over five years.

The organisation recognised, however, that delivery of the IP would require new structures and processes at the senior levels to ensure that the Chief Executive and the TfL Board had adequate visibility. A key component of the new organisation was the need for an Oversight Group to provide the TfL Commissioner with independent assurance as to the progress of the IP and the mitigation of identified risks.

Our approach

Working directly to the TfL Commissioner, we led a joint working team that included cross business representation. After a period of analsis and benchmarking, the team designed new structures and processes to porvide the necessary assurance. The resultant Oversight function, along with the cultivated 'challenge and support' culture, provided the Commissioner and the TfL Board with assurance as to IP progress, independent of the line management structures.