How you can reduce cost but not limit growth in the new year

How you can reduce costs without limiting growth

A big challenge facing many Leadership teams will be how to reduce costs without limiting growth. Generating more sales will often require additional heads in the back office to service customers, with the result that as new business volumes increase, so do unit costs. Profits will decline as the back office continues to expand, which creates a challenge of how to grow the business as well as controlling and reducing costs.

Operations are key to growth

The back office operations is not a direct driver of growth and is often overlooked. However, operational activities fundamentally underpin growth, since it's the back office that delivers on written new business generated by sales and marketing. It provides the key to delivering the customer experience and is often the differentiator for competitive advantage.

Growth is never by mere chance; it is the result of forces working together.

James Cash Penney

The combustion comparison

Historical engine performance output was limited by engine size, where increased output could only be obtained by using a bigger engine. However, modern engines with the latest technology are now smaller, more powerful and more efficient. They are are capable of producing greater output and better performance than ever before.

Back Office Engine

A back office is no different, since modern workforce management and optimisation software technology have enabled greater output and better performance to be achieved. Key performance indicators such as productivity, efficiency and quality are all capable of being significantly improved whilst providing the ability to reduce costs through people and process optimisation.

Aligning growth with operations

If an operation can handle growth, it is essential to understand whether growth and new business can be delivered together with control of costs - creating capacity through back office optimisation.  However, despite forecasting being regularly used in in sales and marketing, it is often not aligned in the operations teams. If sales forecasts are aligned with operations forecasts it quickly becomes apparent whether sufficient capacity and resource is available to handle new business volumes.

Some initial questions to provide useful insight on the back office operation include:

  • Do work volumes fluctuate wildly yet available resources still cope with the peaks and troughs. Does work expand to fill the day?
  • Is there a significant range of productivity performance within the teams?
  • Does lost time match against high demand days of the month?
  • Are people targeted for effort in hours rather than weekly/monthly volumes completed?

Those who cannot change their minds cannot change anything.

George Bernard Shaw

Virtual technology in business

Sustainable growth

Although back office optimisation software provides a major upgrade to any operational engine, there are many other ways to increase performance. The people in an operation are essential too. Developing the right culture, the right frameworks, the right objectives and supported by effective software are all key requirements. Correctly aligning these will enable individuals to improve the efficiency and output every day by making thousands of incremental changes.

To drive growth, operations need the flexibility and capacity to handle increased new business. Three months into a new sales plan, no leadership team wants to discover that the operational cost base is insufficient and new business volumes can't be serviced.

To avoid this situation, it's important to focus questions on the following:

  • Establish what insights and metrics are in place to assess existing operational capabilities.
  • Clarify what is being done to ensure they are aligned with growth forecasts.
  • Understand what tools and frameworks exist (or are missing) to guarantee delivery.

By knowing the extent of operational capabilities and relating these to projected sales increases, sustainable growth can confidently be achieved without increasing the cost base. In addition, continuing efficiencies will result in reduced costs being achieved over time.

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