Content rules!

Once upon a time there was CONTENT (him) and long long long long after the content met METHODOLOGY (she). The content is the king. And methodology the queen. And they lived happily ever after. Fairy-tale like. It is. You have to have both to be successful. First tells you which cost categories you should address, where in the processess/contracts/ways of working you should look them up. The second tells how it should be planned and executed.

Why? Without the right content no cost reduction project can be successful. The whole idea is to tackle the right business areas, appropriate costs and to apply correct measures, looking at them content-wise. Methodology only helps us to do it right, to be able to have every single step transparent, measurable, trackable, that is, "under control" to see whether the whole exercise leads in the right direction. Methodology eases the job, content enables the job to be done.

Try not to mix the order up! You can not start with the methodology and hope that someone will come along to fill up with content the empty plan tables of measures. Yes, we can see plenty of such projects. They are doomed to be unsuccessful, at the best very late if you by any chance somewhere in the middle meet the right person (internal or external knowledgeable consultant) to put you on track content-wise.

Here are some tips on the content of the cost reduction program you should follow:

• Don’t focus on selected business areas only. Procurement or IT or marketing alone (the "low hanging fruits of cost reduction") should not be the focus but they should be done: 
• They benefit your company and unleash your team potential 
• The quick wins eliminate/reduce team frustration and prepare for more complex cost reduction initiatives to furnish more substantial improvements.
• Don’t limit the cost reduction activities to mother company – take it along the corporate governance infrastructure. 
• Include subsidiaries in cost reduction activities with same ideas, methodological concept and approach, same executive infrastructure and adjusted goals, initiatives as well as implementation speed according to their specifics. 
• But acknowledge “specifics”!
• Don’t underestimate almost hidden acting of costs doing the law of large numbers! Bite by bite will small unplanned costs swallow your cost reductions away!
• Costs are like food. Slowly and regularly and over time they increase to a point you might have "overweight" problems. Especially, if you do not address them daily and carefully, with or without cost reduction program. Therefore, institutionalize costs by reporting and monitoring them regularly not leaving them only as highest priority category of your controlling officer, but also as a regular agenda of everyday internal meetings or occasional retreats. Introduce Cost committee to prevent rather than to reduce costs. That would excel your business model beyond cost cutting towards cost management of the target costs. If not there yet, use the cost reduction program to set cost management up. 

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Buy solutions not time! Lead towards effective and efficient project management.

A lot has been already said on rule No 1: Tell specific enough why to do it! (Do you know how to answer 5 simple Whys; Gimme 5)  and rule No 2: Assign the Right Person to manage the project  (CRO's 50 shades of greatness; Right fish on the hook) in our previous blogs. 

In this one we will focus on external help you get in executing huge cost reduction programs. 

How is it usually done. You hire consultants to help you prepare, plan for and execute the cost reduction program. How? You analyze the situation and benchmark your performance against the competitors to see where are you weak. You identify areas where your performance should be better and to what extent better. Because you hired consultants, they do vast of the work. They are experts in the area, so they should know best, how to handle this things, right? At the end they bring nice wrapped book to the presentation and say: If you do this, your performance in terms of "x" KPI will be better by "y". Nice indeed. One more piece of "shelf-work" it is, because you do not know how to do it. Of course consultants have a solution: a new contract to do the work for you.

Why is this wrong? At the end of the process, in which you were heavily involved only with the operational and administrative tasks (collecting the data, preparing inputs, explaining parts of the situation), you do not have a clue how to proceed forward. You know vaguely what to do, but not how and what exactly. And all you really wanted at the beginning of the process was to come up with a practical program of measures which you could execute by yourselves to be able to achieve the goals. What went wrong? You were involved not commited. You let the consultants to do what they know and not what you need.

What should be done differently? You should make them use their knowledge to satisfy your need! How?

1. Analyzing and benchmarking done together with you. Make sure that you are involved in the cause identification process to be sure that the analysis led to the right causes and what is more important, that the consultants and you understand them in the same way. Understanding the situation is the first point when selecting the appropriate ways to proceed with turning the business around.

2. Reachable goals set. If you leave goal setting to the consultants, make sure that they are working with solid assumptions and your goals are reachable. At the end, they will leave the company, and you will stay to execute what was developed.

3. Detailed cost reduction initiatives developed by you AND consultants together. The proposals for cost reduction initiatives MUST come from inside of the company as they have to be adopted by those who will work and live with them. In case developed by the consultants make sure somebody in the company, who will be responsible for executing them, can and will identify with them.  The consultants should therefore hold your hand during the process and have at least couple of hundred cost reduction measures "on reserve" to support the process of designing the SCORE. To drag them out of their pockets, when you need to get the process going when you are stuck. It is required that draft measures and tools to track and oversee them in execution phase are prepared for every initiative (tables, spreadsheets, procedures, policies, …) as scope of their work, no extras can be tolerated. 

4. Follow the golden rule: Do not allow that consultants earn up-front! They should work hand in hand with you also when executing. Do not let them sell time they spend with you, but solutions they provide you with. They should support you with the implementation until you asses that the critical point was reached and you feel comfortable in doing the program further by yourselves. They should not be hired to prepare a report of 1000 pages, but to assist you in achieving the goals set. And doing ALL of this for the price they stated in the first contract you signed with them. Do not enable finding the reasons for the second and third contract their first priority. It is your money to be invested and therefore your CALL.

http://www.avanton.si