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, improve service delivery and increase profitability for next year. Businesses face rising costs from many different factors, with new regulations, changes in technology or a devalued product from new entrants being just a few examples. Experience shows this happens 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 to eliminate waste and reduce expenses. 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 also the engine that drives the business, delivering on the promises made by marketing and sales to customers. This can cause a real quandary for business leaders. They know that releasing resource in the back office will deliver short term gains, but could also create 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 affecting the quality of my future service delivery?
The major cost in life is the time wasted that can't possibly ever be replaced.
The key to effective cost reduction is to unlock the potential in the back office operation
Our experience with clients shows there are huge gains to be made in the back office of most operations. Implemented correctly, these gains deliver increased capacity for growth and an improved operational performance as well as achieving a significant reduction in operational costs. For any business leader, the first step to achieving these gains and unlocking cost reduction is to request a fact finding analysis and obtain a greater understanding of the ‘as is' position which can be benchmarked against Industry Best Practice performance Indicators. Armed with this information, an informed view can be made of what can potentially be delivered. For many organisations an external operational diagnostic is the best approach to take, since it can deliver an unbiased assessment of the back office operation. With an impartial report unaffected by internal politics, there is real clarity on the issues affecting service performance and what is driving unnecessary expenditure.
Four key areas to examine that affect performance, profitability and cost base
Effective operations management is essential to provide the ability to maximise efficiency and consistently hit targets to deliver positive customer outcomes. Without the right people with the right skills, in the right place at the right time, teams are inefficient and the quality of service delivery decreases - with an inevitable increase in costs.
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 effective operations management software can raise the bar and keep on raising it.
When costs are too high, it’s essential to review the organisational design. Mapping activity in both the front and back office, analysing process designs and workflows will reveal inefficiencies and areas for productivity gains and cost reductions. This analysis almost always reveals significant wastage and poor allocation of assets, as well as areas where resources are devoted to non-value-adding activities.
Most business leaders know that effective workflow 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.
Change the way you look at things and and the things you look at change
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 both 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. Providing clarity on the benefits that can be delivered will help to paint a clear future picture of how cost reduction will be achieved to increase productivity, how service delivery can be improved - and more importantly how that change can be sustainable over the long term.