Delivering the benefits from cost transformation
- The challengesRead more
Many organisation-wide cost transformation programmes fall well short of the savings stated in the original business case. The combination of human psychology and the flawed methods used to construct the business case and set performance targets can lead to traditional programme failure. Using more progressive approaches to business engagement, programme design and delivery can transform results.
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 can at the very least fail to deliver if executed badly, and at worst can significantly undermine an organisation's business goals and service integrity.
- Our approachRead more
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, to when benefits have been delivered, audited and sustained.
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. The eight stages encompass:
- Review Corporate Strategy - Update and understand the relevant elements of corporate strategy for the cost reduction programme.
- Establish Cost Base - Build a high level understanding of the organisational cost baseline, captured in a common definition and format.
- Set High Level Targets - Establish the operating and capital spending targets, that meet senior stakeholder requirements, yet remain feasible in relation to the actual cost base.
- Map and Assess Cost Drivers - Create a detailed cost dataset and associated cost driver metrics, to allow insightful analysis of organisational efficiency.
- Identify Current and Potential Initiatives - These can be identified from internal debate, cost driver data crunching, external benchmarking, and external best practice review.
- Prioritise & Optimise Initiatives - Filter, categoriseand refine the initiatives, prioritise on value, timescale and risk and then optimise the overall portfolio. This recognises that the previous step will in all likelihood identify many more initiatives than can realistically be managed.
- Manage, Deliver & Audit - Initiative delivery, progress reporting, programme assurance, cost reduction audit.
- Sustain & Adjust - Sustain the cost reduction savings post-delivery. Ensure the organisation learns and adjusts from programme delivery.
This approach has been developed from the Moorhouse team's experience in delivering complex programme change, including cost reduction programmes, across many sectors.
Methodology overview
- Proof of what we can doRead more
- Cost reduction through collaboration across the nuclear sector for the NDA
- Designing an enterprise portfolio management capability at AstraZeneca
- Optimising whole life costs at Crossrail
- Delivering Successful Strategic Cost Reduction
- Transcending the psychological traps of cost reduction programmes
- Accepting complexity and uncertainty in cost reduction decision making
- Cost reduction data and decision making
- The importance of assurance in cost reduction programmes
- Why we often fail to hit planned cost reductions
- Improving efficiency and performance whilst reducing costs
- Services we offerRead more
