Considerations for Effective Cost Management
by Leonard Wiens, Beniva Partner
The time of a business leader is relentlessly filled with competing drivers. A near constant dichotomy exists in needing to invest in emerging and transformative ways and markets to conduct business, while maintaining or reducing G&A costs.
Some leaders have the added burden of working in global industries where their foundational business models are shifting with ever increasing speed. Operating margins are pressured from increased competition, evolving markets and economies and, pending the political climate – shifts in government regulation and taxation.
Leaders have a finite number of tactics and levers to pull to transform their operating cost profile. Beniva Consulting Group can help. The table below illustrates a few of the tactics Beniva has used to assist clients on their cost improvement initiatives.
Monitor & Optimize Workforce Costs
- Organization design (Span and layer review and optimization)
- Service re-alignment and roles restructuring
- Performance based reductions leveraging advanced data analytics
- Contingent labour management practices and sourcing
- Strategic sourcing of non-core functions
- Compensation Review & Reset
Organization Design is a specific discipline that builds on a foundation of business strategy and operational focus. It needs to accommodate core psychological human tendencies amongst leadership teams, including acknowledgement of past decisions made with no fear of reprisal. Core foundational design principles related to levels of decentralization, geographic footprint, performance culture, span and layer analysis, and top talent. It also relates to making design trade-offs between idealistic and realistic scopes of accountability, as well as target-state and other critical defined factors. All of these are planned for strategic design sessions and embedded into the OD process. Enduring cultural changes, informal networks and information flow are also considered to ensure that significant financial savings gains made from Workforce design and optimization are sustainable in the long term.
Service Re-Alignment does not necessitate substantial organization design. Rather, service centralization, ownership and decommissioning (with organizational training and change management) can deliver tangible savings without affecting operations if performed effectively. Roles restructuring to balance tasks and leadership portfolios can optimize delivery and processes.
Performance Based Data Analytics involves examining a holistic scorecard of communications related to internal workforce networks, system transactions, revenue, and other metrics that have been proven to reveal vast differences between top organizational talent and your essential staff versus less productive workforce. Powerful insights, previously unable to quantify, can be gained with data driven analysis resulting in significant organizational efficiency gains with minimal productivity loss.
Contingent Workforce Management costs are often a substantial and less rigorously managed component of HR costs. Decentralized contingent workforce management practices often lead to significant unbalance in rate cards, term, allowances and other costs. Contingent workforce suppliers tend to grow exponentially and in an uncontrolled fashion. Altering these practices will result in substantial savings. However, the organization needs to be ready to manage this workforce in a different way. The implications of these changes need to be scoped and planned carefully to avoid operational disruption.
Strategic Sourcing enables the many organizations that currently maintain the ongoing management and operation of non-core functions to reduce workforce and service delivery spend. This is done through accessing lower cost labor pools, whether national or international.
Compensation Review & Reset delivers the straightforward premise that new operating economies must be reflected in employee and contingent labor total compensation packages. Complexities and planning are required however in remaining competitive in retaining and attracting talent – strategies of which can be embedded in these quicker initiatives.
Process Redesign, Robotics & Automation
Manual Business Process Redesign. Business Process Re-engineering (BPR) is a more hands-on approach that aims to redesign organizational processes from the ground up. BPR projects can be anything from minor tweaks to major shifts in organizational workflow management with the common end goal of a relentless drive towards increased efficiency.
Traditional, effective BPR practices focus on Outcomes instead of Tasks. However, in today’s digital work, information flows and high integrity management reporting must form an equal cornerstone in BPR initiatives. BPR needs to focus on decision points, duplication, ‘dead-end’ work activities, and enable a relentless elimination of tasks that are not providing core Outcome value.
Business process modelling as part of a re-engineering activity is needed, but we give strong caution against a typical consultant-heavy, deep process diagram building project approach. Business process modelling often gets carried away to document a ‘process’ that very few are actually operating against anyways. A fit-for-purpose level of detail is needed to identify reengineering opportunities, but complexity should be studiously avoided.
Manual business process reengineering is a necessary step to take when holistic, fundamental and complicating organizational processes require reworking, which differs from Robotic Process Automation discussed next.
Robotic Process Automation (RPA). There is tremendous investment, solutions focus (and hype) being focused today by future-oriented organizations in an emerging field called robotic process automation.
What is RPA? In short, software robots learn by observing humans in capturing decision points, responses, manipulating and updating data, sending out communications and interacting with many different IT applications. The benefits touted however are material shift changes in productivity through speed, accuracy, and no-downtime related to typical employee workers.
Robotic Process Automation marks the beginning of the next wave of broader workforce automation technologies that are advancing upon society – but RPA is here and transforming companies already. Workforce reductions realized are significant across many industries even today, and indeed, RPA is reputably estimated to automate approximately 30% of white-collar jobs by 2025.
Today, IT RPA solutions are in rapid growth and development and are consistently leap-frogging their competitors in capability and functionality with every new release. However, there is almost as much increased confusion around the potential of Robotics Process Automation as well.
These projects are not IT projects, but need to be business led transformation projects enabled by IT solutions.
Spend Data Intelligence & Policy
Data visualization software has made impressive leaps in capability and advancing to more mainstream appeal starting in approximately 2014. The end-user ability to analyze, visualize and make decions on data they use to manage their work is impressive for those that have stood up effective Data Visualization services within their enterprise.
Spend data intelligence leverages these increasingly common-place tools to provide powerful insights into data quality, management and governance related to G&A and capital spend. Use-cases of successful application include labor costs, supplier/vendor payments, contractual spend analysis vs invoices, as well as remediating administrative errors.
The simplicity of findings and insights could never be achieved without these emerging technologies like Microsoft’s Power BI, Tableau or others. But using these tools with sound analysis can deliver impressive returns on investment for CFOs and Controllers across any industry.
Streamline the Supply Chain
Another core tactic is streamlining the supply chain. There are many approaches to this including vendor rationalization, vertical integration, optimizing and automating ‘procure-to-pay’ processes and improving catalogue management. Although this is not an area where we provide expertise, we can support and provide necessary governance and structural support to your supply chain project.