Taking cost out of the business – The Right Way

     
First published in Leasing World, December 2008

     

Faced with the most turbulent economic conditions since the great depression, what can we do ? Hold our heads in our hands? Wait and hope the nanny state will make everything better again?

     

Brendan Gleeson, Group Sales & Marketing Director, White Clarke Group says ‘Stand up and fight’. He firmly belives that a combination of ‘right thinking, the right approach and the right tools is the only way to survive and indeed prosper in this environment. He presents here this approach and gives us a gardening lesson along the way.
       

One of my hobbies is people watching. And it’s fascinating to observe how people react whenever their comfortable world is threatened. Ultimately, it boils down to fight or flight. And the current economic turmoil is a perfect example. We’ll soon see who are the true fighters.

     

Economic disaster? The media is certainly painting a picture of disaster and things do look bad. What began as a ‘credit crunch’ has already turned into a recession. The motor industry has become a car wreck, with residual values falling through the floor, new car sales have slumped to their lowest levels in years and major players such as GMAC have been pulling out of a number of countries.

     

But anyone who has survived the last two recessions will know there are some clear lessons – some companies will fall by the wayside, others will survive. And the survivors always come out all the stronger for it. The survivors all adopt strategies built around common themes. In our environment, they revolve around

    
Psychology, Methodology and Technology – used sensibly and sensitively, they can deliver remarkable results.
 

Psychology

Sports psychologists have written lots of fabulous material on thinking to win, so let’s take a leaf from their book.

 

The first step in our response to the current turmoil should be to adopt a positive ‘I can handle it’ mental attitude. Adopt the winners’ formula, BELIEF. Believe we can survive, believe we can meet the challenges, believe we can prosper. All achievement starts with strong self belief.

 

The way we frame the challenges we face is vital. Ask, ‘Is this a catastrophe or just a problem?’

 

The Massacre in Rawanda; that’s a catastrophe. Starvation in Ethopia; that’s a catastrophe. What we face is a problem. A tough problem. but a problem none the less. Thinking about it like this is important because problems are for solving. As leaders and managers, it’s what we get paid to do.

 

This is not the time for leading from behind the desk or leadership by email. Now is the time for strong change leaders to step forward. Leaders who provide a clear vision of a brighter future, who spread belief and who inspire their teams to meet emerging challenges. It’s all about creating an agile culture – a core responsiveness that accepts that change is constant. Change should be welcomed as a chance to create and seize new opportunities.

Methodology

Inevitably, focus is going to be on taking cost out of the business. Slashing operational costs. But slashing can be dangerous, so what is needed is a methodology that ensures we don’t destroy long term business value. Time to take a tip from the Good Gardner’s Guide - "Any fool can chop….but it takes a real professional to prune" There’s no art or science to just chopping. It’s all about brute force. Pruning, on the other hand, (an approach we have employed at WCG for a number of years) is simple, sustainable and – it works. With careful pruning we have helped clients to achieve process savings of up to 40%. A direct contribution to the bottom line.

 

The White Clarke School of Pruning takes a six step approach:

 

Context Gathering - We begin by context gathering. A two week intensive exercise to focus on understanding the business model. The pain and stress points. We like to get quickly beyond executive interviews and get stuck in amongst the staff. We spend a lot of time on the floor, observing the end-to-end processes – from new business enquiry, to quote, to application, to underwriting, to payout, right through in-life and back office activities. This helps to really get under the skin of the organisation and arrive at a truly specific proposition.

 

Engaging the Business - Kick off involves key stakeholders in the same room, identifying expectations and success factors. This is not some high-level, feel-good exercise. All the individuals with the most to benefit or lose have to agree everything from key deliverables to outputs and milestones.

 

Identifying ‘As-Is’ Business Processes - This is all about understanding the processes and technologies, with focus on whether they are being optimised. And the best approach is through observing those processes and technologies in action, up close and personal. That means observing staff while working on real-life cases /applications / contracts. We end up with what is affectionately known as a ‘Brown Paper’ (see picture) – acres and acres of very specific, real-life workflow analysis.

 

Defining ‘To Be’ Processes – This is where focus shifts to processes that need optimisation, elimination and incorporation into best practices. We don’t advocate starting with a blank sheet of paper. Rather, we start with a straw man design, incorporating best practices that we have observed across the industry.

 

Finding technology-enablers - Best practice use of technology is key. What-do-others-do thinking is of value and benefit, as opposed to relying on people within the organisation who simply relive the same experience 365 days a year.

 

Business Case Development and Change Management - You need a strong quantitative business case – identifying precisely how the process and underpinning technology is going to generate cost savings and improvements. I believe that this is a real strength of our approach – utilising outputs from the ‘As Is’ and ‘To Be’ phases to produce a business case clearly grounded in deduction and derivation.

Technology

 

The good news is that it’s not always necessary to bin existing technology. It may be that existing platforms can deliver what’s required with a small amount of tweaking – optimising what is already there.

 

If tweaking isn’t an option, then the next stage might be seeking specific ‘components’ to address specific needs. I use the word ‘components’ rather than solutions because some software developers, such as White Clarke Group, have adopted a ‘component based technology’ that enables users to mix and match applications. Component based solutions can more readily be plugged into existing platforms.

 

I have already suggested that times of trouble can also be times of significant opportunity and there are strong arguments for taking on large scale IT investments during a downturn. The first boils down to costs. Just like their customers, vendors are under cost and revenue pressures, so now is a good time to negotiate. More importantly, there will be capacity within the business to take on the additional work associated with large scale implementations. It is so much easier to divert resources to system implementations in a downturn. And it has the additional benefit of raising morale by bringing the future into sharp focus.

 

Most important of all, companies that choose to implement major systems improvements now will be best positioned to take advantage when the upturn comes. Fortune favours the brave? Sure, and it also favours the prepared!