|There are so many things you can and should consider when forming your cost reduction plan that we could literally write a book, but in this simple post I want to give you some top tips for cutting costs as quickly, effectively and with as little pain as possible.
- Form a plan and execute it quickly. Speed is important. As soon as there is an inkling within your business/ department that a cost reduction programme is likely, then motivation, quality and service levels will sink. People need confidence and security in periods of uncertainty.
- In most organisations that we work in we see between 10% and 40% opportunity for improvements in productivity- which means potential staff cost savings/ opportunities to absorb more work. Make sure you have best practice performance management processes and behaviours in place. Even in trying times, you can get the best from people- both for their benefit and the benefit of your business/ department.
- SYNCHRONISE your operation. The more your interdependent departments are out of sync the more cost and wastage will result. As a general rule, whether you are ripening bananas or installing fibres, first in and first out is the principle to follow.
- Set the PACE of your operation. If you have teams working very hard on things they don’t need to, when they don’t need to, you will be burning cash. Your operation, whether it’s patients or whether it’s widgets, has a pace that is completely equal to the maximum throughput capability of your biggest bottleneck.
- Make fact based decisions. Conduct variance analyses and focus on the poorest performing quartile. Review a set of ABC accounts- activity based costing.
- Calculate Standard Times for each activity, form a demand volume forecast, combine the two and determine how much resource you are likely to actually need. Consider your balance of permanent and temporary staff. Temporary staff might cost more per week, but if you only need them for two months over the next year, you’ll save costs!
- Never take your eye off quality!! You must keep your customers, however hard things are!