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A Constructive Approach to Cost Management

· cost management,Impact,opportunities

We all want to reduce costs and free up money to do other things but why is it that tackling costs is something that we often approach with a heavy heart?

In reality it often isn't an easy task and isn't seen as exciting by many. It maybe because we feel forced to do it, because funding is tight. It may require some complex problem solving. It often requires people to change and this requires convincing them and in turn helping them to change. Let’s be honest, sometimes it involves asking people to move on. None of this is easy, especially when it involves people we work with everyday. In this blog, we want to talk about some ways to turn this feeling around.

Creating the Right Culture

Change and cost reduction should come to be seen as part of the way an organisation goes about things. Do you remember when everyone used to talk about the management practice of ‘kaizen’, which is Japanese for continuous improvement? This is now seen as part of a ‘lean’ approach and lean development processes are very much part of digital innovation. If induction processes, annual objectives and regular events like team meetings include regularly looking for and implementing improvements, it helps to ‘normalise’ change.

The key word is improvement and this is much more exciting! However, it does require management to define what is meant by improvement. We don't think this is just about doing things more cheaply, it is about aligning an organisation more closely with its mission and stakeholders.

Two of the key features of organisations which have proved to have good environments in which digital innovation can take place are; being stakeholder centric and having a culture of continual learning. The pace of changes in technology and behaviours has increased significantly with the digital revolution and it is easy to be doing things because you think that is what your stakeholders like and want rather than using data to keep up with their evolving preferences.

Importantly, the culture must both support and reward people for changing and targeted training & development must be part of what makes up the culture.

Knowing What Creates Costs

Simply reducing costs across the board and pairing all existing activities may be easy but it risks creating a downward spiral in which ever reducing levels of service and investment lead to the need to save even more costs. The key is to know what activities give rise to how much cost and then assess these in terms of value to your mission. In turn, seeing what scope there is for improvement and cost reduction.

Smaller organisations often present their costs following a natural classification: salaries, rent, printing etc. Larger organisations might start to group costs by team or function, for example marketing or finance. The real key is to be able to understand how much it costs to do something across the whole organisation and in doing this to be able to include some approximation of the staff time cost involved.

If there is a real understanding of what costs are incurred in doing something then it will feel more rewarding to seek improvement. Ultimately, cost reductions and buy in to any decision to discontinue doing something will happen more easily.

Digital offers real potential for reducing costs whilst improving your service, data quality and accuracy. We can help you to review and streamline processes both within and across teams, identifying where technology and training can add value. Why not browse our Cost Management Services to see how we can help.

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