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can you give an example of a company that managed to figure that out and then how they went in and change things I can
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give describe one that I feel there it did it extremely well and the so the year the onset was that that there was a
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logistics company and a liner what we call it so transporting large pieces of on huge vessels across the oceans and
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this is a difficult industry and a lot of cost pressure and they basically took out whatever they had in their
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operations or at least they felt they had taken it out and here but it still wasn't good enough and discussions
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around further cost reduction were difficult because people who are arguing I've already taken out ten twenty thirty
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percent of my cost of my people and what then happened was that the CEO said well
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then if that's at the end of where we can get to then we'll change this so i
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will change the whole environment in which we run our companies so they moved from a very localized country by country
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set up and said we will now as of now run it on a global scale certain things will be global enter and there for
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example sales or services or there they also took out all the support functions and drove them on a global scale so let
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now allowed people first of all to have a completely different view and things and end question do we really need this
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on a local level do we really need to have an HR department doing recruiting in germany or is it good enough to do
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that for western europe and thereby have a completely different discussion that previously in the old environment in the
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old governance structures didn't just didn't happen and thereby i think what
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the what the real success was that there wasn't just maybe getting another five
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percent through a different global structure but it enabled another critical questioning of what do we
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really need where do we move to and how can we how can we change our whole delivery model and thereby they actually
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created another twenty-five percent savings on top of what they had done before companies that
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have been successful overall with this what what what are some of the approaches that they took to figure out
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the right thing to do right in general when you embark on such a journey I think the first and foremost critical
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thing is that you'll understand and agree in your senior leadership what your aim for is this another let's say
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five percent cost take out with keeping everything where it is or are we talking
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about a radical transformation and durand and thereby changing not only what's happening in the support
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functions but also indirectly what's happening in the whole business and and
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that needs to be discussed first so that's all about scope that's about speed how quick do we need to see
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results how much do we want to see and how much do we want to involve the organization so these are critical
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questions that leadership should ask themselves and align on so that later when things start to roll they can
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actually compare and adjust according to the principles they've lied laid out at
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the beginning so once that's are such a discussions taking place and agree then
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it's important to take stock and really understand where is our starting position where do we actually jump from
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and and then decide how far are we going to move as i said before like a cost target or speed that needs to relate to
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a baseline so you say well I want to take out twenty-five percent of costs over three years and the cost to achieve
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is allowed to be whatever the annual savings then you get a very clear breakdown of what needs to happen over
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what sort of time and thereby also a good understanding of which methodologies which approach can you
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actually use in order to achieve that which is the next step so we often find her in these discussions that people
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have things in their mind that they want to do like I want to engage the whole organization
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at the same time they want to change the the setup enter and move things to India
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so it will be difficult to involve everyone and ask them whether they want to move their job to India so there are
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certain things which are contradictory and we once you've you've set your mind
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on certain goals you need to make sure that your your approach to achieve them actually fits it that sounds are a bit
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trivial but you often find that there's there's these processes which are in
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terms of engagement in terms of duration in terms of swiftness of execution they
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don't match what the original goal of other companies so once you have that plan established what are the next steps
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supposing you are you have set your targets then the next step is to really work on detailed plans to deliver
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against these targets and once these have been are developed it's a rigorous
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management process of making sure it happens enter and there we always sir try to remember our our clients that the
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key after some stage is not to do your change but to arrive at your goal because after some time you can often
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find in a header I worked with a bank in Germany enter they were so stuck on on basically doing a certain change that
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they forgot to monitor what they actually try to achieve enter and before they actually implemented that sort of
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change they had already arrived coastwise at the point where they want it to be and then you can have a
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discussion whether it's really useful to let go of another 300 people or whether
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you want to do that at another time or not at all so it's always key to keep
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focusing on where you want to get to so at the other end if there's a cost lift
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up due to other effects inflation whatever you adjust your plans so you arrive at at your target and last but
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not least enter and that's sir I think core is to use such a such a drive to
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foster different kind of thinking a different philosophy so the sale of how did you
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look at cost and thereby make sure you don't have these big programs all the
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time or every two years but you have a continuous discussion around best use of resource as discussed before between
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units so the ones who produce and the ones who take it both on a budgeting level on a quarterly level so you really
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make best use of your enterprise resources especially at the support function level so let me ask you when
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you go into a company as a consultant how do you actually observe that there's
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an efficiency there what is it you look for how do you see it you mentioned that
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sometimes the waste is invisible it's not like laying around on the shop floor
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we look at it through four lenses well number one is we measure how many resources are attached to certain
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activities so how many HR people do recruiting number two is we look at organizational structures how deep is it
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how spread is it typically you find her that if there are two spread or two deep
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in the organization then they are inefficient number three we look at what do they deliver so what sort of key
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process indicators or key performance indicators do we find how long does something take how long does it take you
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to get your monthly closing how long does it take you to do your budget how long does it take you to actually get
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someone hired if you have an open position and lastly number four we look at the internal way of looking at the
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quality of service what's the feedback that HR gives finance what's the feedback that procurement gives
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controlling about the quality of service the timing the level of service and so on so if you look at those four lenses
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and you evaluate them it gives you a really good picture where the real problems lie enter and how to overcome
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them so could you give an example of a company that that actually did that so we worked with a chemicals company in
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Europe and what we found just taking their finance in their HR function that they had very different
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so the finance function was actually very lean very narrow structured in their in their organization but they
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didn't get involved in any kind of business related needs so they didn't
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provide the numbers that people needed to do sales forecasting due to proper client based budgeting to do proper
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pricing and so on so they they were not lacking on the cost side but they were lacking on the content side what do they
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deliver on the other end there was the HR department who was seen as very receptive they were always there if you
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require them there they were very friendly and but they were inefficient so it took them very long to do anything
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like a recruiting process took for three months shouldn't take longer than six
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weeks to find the right person they were way too many they were actually twice as
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many than you would assume from an industry benchmark and their structure was complex and complicated so within
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the same company but under different and a different leadership and and with different history you can find very
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different issues that require then different approaches to actually get them into a state of excellence what are
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the most typical inefficiencies in companies on a support function level I think the most most important lever is
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to get the service level discussion between those who provide a service and those who actually take it up going and
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thereby reduce service levels to the right degree so when you look at let's say a total saving range of your savings
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being a hundred percent work and safe you'll probably get about thirty to forty percent of those savings out of
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that specific lever and other levers being getting a structure right getting your processes right getting automation
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going maybe doing some offshoring or getting the services to the right price that all all is usually only about half
00:11:06
the size of what you get from getting the service levels adjusted to what's really needed by the business for all of
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these things it may vary by industry you could let us know about that but what kind of savings do
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you see with these companies when they take on a program to really go into this deeply and and make changes so what we
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typically I think that our average program which would yield a saving of about twenty-five to thirty percent
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let's on the one hand not being too radical but on the other hand also being
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a worthwhile to actually engage on the discussion whether things need to change or should we just take out for example
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five percent then you often see people just changing mine herb it's not really
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questioning themselves just doing a little bit on the fringes and trying to get everything through the door as
00:12:03
previously so twenty five to thirty percent on the cost side and in addition I think that the biggest side effect is
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that you get a different culture of discussing things and thereby quicker decisions much quicker decisions to cut
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decision time by half for example and a lot of better understanding of what the other person is actually doing so how do
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we provide real support as a support function to the business instead of being a bureaucratic burden on someone
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and and so there's a lot of indirect benefits from a process where you engage
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the organization not just the support function but also the the the units that work with those support functions so
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that the intact and develop a new way of working so you have a one-time reduction
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in cost which may continue throughout the years but you've also set up a situation where maybe some of those
00:13:02
inefficiencies that crept in those layers of complexity are less likely to creep back in executive exactly so what
00:13:09
you try to do and we will all be in human beings will never fully succeed is to reduce the level of the era of the
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old problems coming back enter that so so structures becoming more complex governance becoming more complex people
00:13:26
just being added on and thereby creating complex processes and information flows so all of this being trimmed down
00:13:33
to an acceptable level keeping in mind that for many companies cost is important but cost is only a means to
00:13:42
actually achieve revenues so they're in the business that might be growing that
00:13:47
might be expanding you might acquire things so it's important to look at cost
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enter and these support functions but it's important to look at them in the way not only as a cost Center but in way
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of enabling the other functions to deliver their best what do you find top leaders the top team struggles with the
00:14:06
most as they approach a program like of cost-cutting like this in my observation
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the biggest issue that we find is it there is little alignment on the actual goals that such a program is is having
00:14:25
and so the real underlying issues that you try to address they often paste it over by we need to save twenty percent
00:14:36
and then people trying to push their own agenda indirectly by saying this is in scope this is out of scope we have to do
00:14:42
this we have to do that but it only comes out over time so misalignment or not existing alignment at the beginning
00:14:50
think it's the biggest issue that we observe to hinder these on on a senior management level and the second one that
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sir that's key for such a program to to succeed is then to engage over time and
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not to declare victory when you've basically only started to see how it could work so I think the really
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sticking with it supporting your people pushing them but also then a pet on the back where it's required and helpful is
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extremely it is extremely helpful and powerful in order to make such a program a success the companies that get it
00:15:30
right what is it that they do differently what's their approach there when you get into a company who are who
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is performing well I think we see two elements one is two really open an open arena to discuss
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core issues on a senior level so they discuss that doesn't mean that it's this
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is basic democracy and everyone can then raise their hand and then they take a vote they can still have a very
00:16:01
hierarchical decision process but there's an open discussion to get the real issues out and then a line on it
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and then everyone pulls on the same side of the rope into the same direction so that's number one and there's a number
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two is to actually bring that down one level deeper into the organization there were three levels where people between
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various functions intact so to get them to a line on what they want to achieve rather than on what they are doing so a
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goal-oriented thinking process goal-oriented and solution-oriented rather than I need to deliver step one
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two three four and then I hand it over that makes difference between a well-functioning company and one that's
00:16:45
struggling in your work you've found a way to link this cost efficiency drive
00:16:50
to shareholder value I'm curious about back and you tell us about that indeed
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what we saw when we looked at it by industry and in various countries it's there's there's a clear correlation
00:17:01
between a three year total shareholder return enter the change of the air SG&A
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costs for sales general and Edmund house which comes close to our support function definition and there there's a
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bit of the question of the chicken and the egg is it good companies also have good support functions or is it good
00:17:25
support functions creating good companies but what we believe in is there certainly a correlation between
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being good and having good support functions so whatever position you in aim for good support functions and it
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will help you drive the rest of the company and their bar also the total shareholder return okay thank you thank
00:17:46
you for joining us it's been a pleasure to be here thanks you