With the year drawing to a close, CEO’s and CFO’s across the globe will be reviewing their financials. The result for many will be a need to reduce operating costs and improve profitability for next year. Businesses face rising costs from many different factors, new regulations, changes in technology or a devalued product from new entrants are just a few examples that significantly impact profitability and affect future financial security. For many businesses, these factors occur extremely rapidly and need to be combatted quickly.
The rising cost base challenge
When faced with the challenge of rising costs most business leaders have a strong instinct for waste elimination and expenses reduction. Leaders are naturally drawn to the back office as it represents a huge cost base in any organisation and is an obvious area for cost reduction. However, the back office is the engine that drives the business, delivering on the promises made by marketing and sales to customers which creates a real quandary for business leaders. They know that releasing resource in the back office will deliver short term gains, but they will end up in an under-resourced position that results in declining service levels and customer satisfaction. It’s this challenge that frustrates many leaders – how do I reduce back office operation costs without adversely affect future position?
Beware of little expenses. A small leak will sink a great ship.
The key to effective cost reduction is to unlock the potential in the back office operation
In our experience in most operations , there are huge gains to be made in the back office.Implemented correctly these gains deliver increased capacity for growth, improvement in operational performance as well as significant reduction in operational costs. For any business leader, the first step to achieving these gains and unlocking cost reduction is to get clarity on what can be delivered. An operational diagnostic provides an unbiased assessment of the back office operation. With an impartial report unaffected by internal politics, there is real clarity on the issues affecting performance and what is driving unnecessary expenditure.
Four key areas to examine that affect performance, profitability and cost base
Intelligent operational management is essential to efficiency and the ability to consistently hit targets to deliver positive customer outcomes. Without right people, with the right skills, in the right place at the right time, teams are inefficient and costs inevitably rise.
Effective managers deliver enormous productivity gains, resulting in an operation that can do more with less resource. Managers that have positive performance techniques combined with accurate and real-time management information from workforce management software can raise the bar, and keep on raising it.
When costs are too high, it’s essential to review the organisational design. By mapping activity in both the front and back office, analysing process designs and workflows reveals inefficiencies and areas for productivity gains and cost reductions. This analysis almost always reveals significant wastage, poor allocation of assets, as well as areas where resources are devoted to non-value-adding activities.
Business process management
Most business leaders know that effective process management significantly improves service delivery and reduces cost. When faced with a rising cost base it is essential to conduct a fundamental reassessment of back office processes. A thorough assessment reveals significant inefficiency in existing processes resulting in rework and poor use of resource.
If you do not change direction, you may end up where you are heading.
The path to change
For leaders faced with cost base and profitability challenges an operational diagnostic provides the knowledge to invest in the right solutions to increase operational performance and lower costs. By analysing the current operational position opportunities are uncovered and a business case built that identifies specific evidence-based solutions. With clarity on the benefits that can be delivered a clear picture of the future can be painted of how cost reduction will be achieved and return the operation to profitability and most important how that change will be sustainable for a secure future.