00:00:11
can you give an example of a company
00:00:13
that managed to figure that out and then
00:00:17
how they went in and change things I can
00:00:22
give describe one that I feel there it
00:00:25
did it extremely well and the so the
00:00:28
year the onset was that that there was a
00:00:30
logistics company and a liner what we
00:00:34
call it so transporting large pieces of
00:00:37
on huge vessels across the oceans and
00:00:41
this is a difficult industry and a lot
00:00:43
of cost pressure and they basically took
00:00:45
out whatever they had in their
00:00:48
operations or at least they felt they
00:00:49
had taken it out and here but it still
00:00:52
wasn't good enough and discussions
00:00:54
around further cost reduction were
00:00:56
difficult because people who are arguing
00:00:58
I've already taken out ten twenty thirty
00:00:59
percent of my cost of my people and what
00:01:03
then happened was that the CEO said well
00:01:05
then if that's at the end of where we
00:01:08
can get to then we'll change this so i
00:01:11
will change the whole environment in
00:01:13
which we run our companies so they moved
00:01:15
from a very localized country by country
00:01:17
set up and said we will now as of now
00:01:21
run it on a global scale certain things
00:01:23
will be global enter and there for
00:01:26
example sales or services or there they
00:01:29
also took out all the support functions
00:01:31
and drove them on a global scale so let
00:01:35
now allowed people first of all to have
00:01:38
a completely different view and things
00:01:40
and end question do we really need this
00:01:43
on a local level do we really need to
00:01:45
have an HR department doing recruiting
00:01:48
in germany or is it good enough to do
00:01:51
that for western europe and thereby have
00:01:53
a completely different discussion that
00:01:55
previously in the old environment in the
00:01:57
old governance structures didn't just
00:02:00
didn't happen and thereby i think what
00:02:04
the what the real success was that there
00:02:06
wasn't just maybe getting another five
00:02:08
percent through a different global
00:02:10
structure but it enabled another
00:02:14
critical questioning of what do we
00:02:16
really need where do we move to and how
00:02:19
can we how can we change our whole
00:02:21
delivery model and thereby they actually
00:02:24
created another
00:02:25
twenty-five percent savings on top of
00:02:27
what they had done before companies that
00:02:30
have been successful overall with this
00:02:33
what what what are some of the
00:02:35
approaches that they took to figure out
00:02:37
the right thing to do right in general
00:02:41
when you embark on such a journey I
00:02:43
think the first and foremost critical
00:02:46
thing is that you'll understand and
00:02:48
agree in your senior leadership what
00:02:51
your aim for is this another let's say
00:02:54
five percent cost take out with keeping
00:02:58
everything where it is or are we talking
00:03:00
about a radical transformation and
00:03:02
durand and thereby changing not only
00:03:06
what's happening in the support
00:03:08
functions but also indirectly what's
00:03:10
happening in the whole business and and
00:03:13
that needs to be discussed first so
00:03:15
that's all about scope that's about
00:03:17
speed how quick do we need to see
00:03:18
results how much do we want to see and
00:03:21
how much do we want to involve the
00:03:23
organization so these are critical
00:03:25
questions that leadership should ask
00:03:27
themselves and align on so that later
00:03:29
when things start to roll they can
00:03:32
actually compare and adjust according to
00:03:34
the principles they've lied laid out at
00:03:37
the beginning so once that's are such a
00:03:40
discussions taking place and agree then
00:03:43
it's important to take stock and really
00:03:47
understand where is our starting
00:03:48
position where do we actually jump from
00:03:51
and and then decide how far are we going
00:03:55
to move as i said before like a cost
00:03:58
target or speed that needs to relate to
00:04:01
a baseline so you say well I want to
00:04:03
take out twenty-five percent of costs
00:04:05
over three years and the cost to achieve
00:04:08
is allowed to be whatever the annual
00:04:10
savings then you get a very clear
00:04:12
breakdown of what needs to happen over
00:04:15
what sort of time and thereby also a
00:04:17
good understanding of which
00:04:19
methodologies which approach can you
00:04:22
actually use in order to achieve that
00:04:25
which is the next step so we often find
00:04:28
her in these discussions that people
00:04:32
have things in their mind that they want
00:04:34
to do like I want to engage the whole
00:04:37
organization
00:04:39
at the same time they want to change the
00:04:41
the setup enter and move things to India
00:04:45
so it will be difficult to involve
00:04:48
everyone and ask them whether they want
00:04:49
to move their job to India so there are
00:04:51
certain things which are contradictory
00:04:53
and we once you've you've set your mind
00:04:57
on certain goals you need to make sure
00:04:58
that your your approach to achieve them
00:05:01
actually fits it that sounds are a bit
00:05:04
trivial but you often find that there's
00:05:06
there's these processes which are in
00:05:09
terms of engagement in terms of duration
00:05:12
in terms of swiftness of execution they
00:05:16
don't match what the original goal of
00:05:18
other companies so once you have that
00:05:21
plan established what are the next steps
00:05:24
supposing you are you have set your
00:05:27
targets then the next step is to really
00:05:30
work on detailed plans to deliver
00:05:32
against these targets and once these
00:05:35
have been are developed it's a rigorous
00:05:39
management process of making sure it
00:05:41
happens enter and there we always sir
00:05:45
try to remember our our clients that the
00:05:50
key after some stage is not to do your
00:05:53
change but to arrive at your goal
00:05:55
because after some time you can often
00:05:58
find in a header I worked with a bank in
00:06:01
Germany enter they were so stuck on on
00:06:05
basically doing a certain change that
00:06:08
they forgot to monitor what they
00:06:10
actually try to achieve enter and before
00:06:13
they actually implemented that sort of
00:06:15
change they had already arrived
00:06:17
coastwise at the point where they want
00:06:19
it to be and then you can have a
00:06:21
discussion whether it's really useful to
00:06:23
let go of another 300 people or whether
00:06:26
you want to do that at another time or
00:06:27
not at all so it's always key to keep
00:06:30
focusing on where you want to get to so
00:06:34
at the other end if there's a cost lift
00:06:36
up due to other effects inflation
00:06:38
whatever you adjust your plans so you
00:06:40
arrive at at your target and last but
00:06:44
not least enter and that's sir I think
00:06:46
core is to use such a such a drive to
00:06:51
foster
00:06:52
different kind of thinking a different
00:06:54
philosophy so the sale of how did you
00:06:57
look at cost and thereby make sure you
00:07:01
don't have these big programs all the
00:07:03
time or every two years but you have a
00:07:05
continuous discussion around best use of
00:07:08
resource as discussed before between
00:07:11
units so the ones who produce and the
00:07:13
ones who take it both on a budgeting
00:07:15
level on a quarterly level so you really
00:07:17
make best use of your enterprise
00:07:19
resources especially at the support
00:07:22
function level so let me ask you when
00:07:24
you go into a company as a consultant
00:07:27
how do you actually observe that there's
00:07:30
an efficiency there what is it you look
00:07:32
for how do you see it you mentioned that
00:07:34
sometimes the waste is invisible it's
00:07:36
not like laying around on the shop floor
00:07:39
we look at it through four lenses well
00:07:42
number one is we measure how many
00:07:45
resources are attached to certain
00:07:49
activities so how many HR people do
00:07:51
recruiting number two is we look at
00:07:53
organizational structures how deep is it
00:07:56
how spread is it typically you find her
00:07:58
that if there are two spread or two deep
00:08:01
in the organization then they are
00:08:03
inefficient number three we look at what
00:08:06
do they deliver so what sort of key
00:08:09
process indicators or key performance
00:08:12
indicators do we find how long does
00:08:14
something take how long does it take you
00:08:16
to get your monthly closing how long
00:08:18
does it take you to do your budget how
00:08:19
long does it take you to actually get
00:08:21
someone hired if you have an open
00:08:23
position and lastly number four we look
00:08:26
at the internal way of looking at the
00:08:29
quality of service what's the feedback
00:08:31
that HR gives finance what's the
00:08:33
feedback that procurement gives
00:08:35
controlling about the quality of service
00:08:38
the timing the level of service and so
00:08:40
on so if you look at those four lenses
00:08:41
and you evaluate them it gives you a
00:08:44
really good picture where the real
00:08:46
problems lie enter and how to overcome
00:08:48
them so could you give an example of a
00:08:51
company that that actually did that so
00:08:54
we worked with a chemicals company in
00:08:56
Europe and what we found just taking
00:09:00
their finance in their HR function that
00:09:02
they had very different
00:09:04
so the finance function was actually
00:09:06
very lean very narrow structured in
00:09:09
their in their organization but they
00:09:12
didn't get involved in any kind of
00:09:14
business related needs so they didn't
00:09:17
provide the numbers that people needed
00:09:19
to do sales forecasting due to proper
00:09:21
client based budgeting to do proper
00:09:23
pricing and so on so they they were not
00:09:26
lacking on the cost side but they were
00:09:27
lacking on the content side what do they
00:09:30
deliver on the other end there was the
00:09:32
HR department who was seen as very
00:09:35
receptive they were always there if you
00:09:37
require them there they were very
00:09:39
friendly and but they were inefficient
00:09:42
so it took them very long to do anything
00:09:45
like a recruiting process took for three
00:09:47
months shouldn't take longer than six
00:09:49
weeks to find the right person they were
00:09:52
way too many they were actually twice as
00:09:55
many than you would assume from an
00:09:57
industry benchmark and their structure
00:09:59
was complex and complicated so within
00:10:02
the same company but under different and
00:10:05
a different leadership and and with
00:10:07
different history you can find very
00:10:09
different issues that require then
00:10:11
different approaches to actually get
00:10:13
them into a state of excellence what are
00:10:17
the most typical inefficiencies in
00:10:19
companies on a support function level I
00:10:22
think the most most important lever is
00:10:26
to get the service level discussion
00:10:29
between those who provide a service and
00:10:32
those who actually take it up going and
00:10:35
thereby reduce service levels to the
00:10:37
right degree so when you look at let's
00:10:40
say a total saving range of your savings
00:10:43
being a hundred percent work and safe
00:10:45
you'll probably get about thirty to
00:10:47
forty percent of those savings out of
00:10:49
that specific lever and other levers
00:10:52
being getting a structure right getting
00:10:54
your processes right getting automation
00:10:57
going maybe doing some offshoring or
00:11:00
getting the services to the right price
00:11:03
that all all is usually only about half
00:11:06
the size of what you get from getting
00:11:09
the service levels adjusted to what's
00:11:12
really needed by the business for all of
00:11:14
these things it may vary by industry you
00:11:16
could let us know
00:11:17
about that but what kind of savings do
00:11:20
you see with these companies when they
00:11:22
take on a program to really go into this
00:11:27
deeply and and make changes so what we
00:11:30
typically I think that our average
00:11:32
program which would yield a saving of
00:11:36
about twenty-five to thirty percent
00:11:38
let's on the one hand not being too
00:11:42
radical but on the other hand also being
00:11:45
a worthwhile to actually engage on the
00:11:48
discussion whether things need to change
00:11:50
or should we just take out for example
00:11:53
five percent then you often see people
00:11:56
just changing mine herb it's not really
00:11:58
questioning themselves just doing a
00:11:59
little bit on the fringes and trying to
00:12:01
get everything through the door as
00:12:03
previously so twenty five to thirty
00:12:05
percent on the cost side and in addition
00:12:08
I think that the biggest side effect is
00:12:11
that you get a different culture of
00:12:13
discussing things and thereby quicker
00:12:16
decisions much quicker decisions to cut
00:12:18
decision time by half for example and a
00:12:21
lot of better understanding of what the
00:12:23
other person is actually doing so how do
00:12:25
we provide real support as a support
00:12:29
function to the business instead of
00:12:30
being a bureaucratic burden on someone
00:12:33
and and so there's a lot of indirect
00:12:36
benefits from a process where you engage
00:12:39
the organization not just the support
00:12:42
function but also the the the units that
00:12:46
work with those support functions so
00:12:48
that the intact and develop a new way of
00:12:50
working so you have a one-time reduction
00:12:55
in cost which may continue throughout
00:12:57
the years but you've also set up a
00:12:59
situation where maybe some of those
00:13:02
inefficiencies that crept in those
00:13:04
layers of complexity are less likely to
00:13:07
creep back in executive exactly so what
00:13:09
you try to do and we will all be in
00:13:12
human beings will never fully succeed is
00:13:15
to reduce the level of the era of the
00:13:18
old problems coming back enter that so
00:13:21
so structures becoming more complex
00:13:23
governance becoming more complex people
00:13:26
just being added on and thereby creating
00:13:29
complex processes and information
00:13:31
flows so all of this being trimmed down
00:13:33
to an acceptable level keeping in mind
00:13:37
that for many companies cost is
00:13:40
important but cost is only a means to
00:13:42
actually achieve revenues so they're in
00:13:44
the business that might be growing that
00:13:47
might be expanding you might acquire
00:13:49
things so it's important to look at cost
00:13:51
enter and these support functions but
00:13:53
it's important to look at them in the
00:13:55
way not only as a cost Center but in way
00:13:57
of enabling the other functions to
00:13:59
deliver their best what do you find top
00:14:04
leaders the top team struggles with the
00:14:06
most as they approach a program like of
00:14:10
cost-cutting like this in my observation
00:14:14
the biggest issue that we find is it
00:14:17
there is little alignment on the actual
00:14:21
goals that such a program is is having
00:14:25
and so the real underlying issues that
00:14:29
you try to address they often paste it
00:14:33
over by we need to save twenty percent
00:14:36
and then people trying to push their own
00:14:38
agenda indirectly by saying this is in
00:14:41
scope this is out of scope we have to do
00:14:42
this we have to do that but it only
00:14:44
comes out over time so misalignment or
00:14:47
not existing alignment at the beginning
00:14:50
think it's the biggest issue that we
00:14:52
observe to hinder these on on a senior
00:14:55
management level and the second one that
00:14:58
sir that's key for such a program to to
00:15:01
succeed is then to engage over time and
00:15:04
not to declare victory when you've
00:15:06
basically only started to see how it
00:15:10
could work so I think the really
00:15:13
sticking with it supporting your people
00:15:15
pushing them but also then a pet on the
00:15:18
back where it's required and helpful is
00:15:21
extremely it is extremely helpful and
00:15:25
powerful in order to make such a program
00:15:27
a success the companies that get it
00:15:30
right what is it that they do
00:15:33
differently what's their approach there
00:15:36
when you get into a company who are who
00:15:40
is performing well I think we see two
00:15:42
elements one is two
00:15:44
really open an open arena to discuss
00:15:50
core issues on a senior level so they
00:15:52
discuss that doesn't mean that it's this
00:15:55
is basic democracy and everyone can then
00:15:57
raise their hand and then they take a
00:15:59
vote they can still have a very
00:16:01
hierarchical decision process but
00:16:03
there's an open discussion to get the
00:16:05
real issues out and then a line on it
00:16:07
and then everyone pulls on the same side
00:16:10
of the rope into the same direction so
00:16:12
that's number one and there's a number
00:16:14
two is to actually bring that down one
00:16:16
level deeper into the organization there
00:16:18
were three levels where people between
00:16:21
various functions intact so to get them
00:16:24
to a line on what they want to achieve
00:16:26
rather than on what they are doing so a
00:16:30
goal-oriented thinking process
00:16:33
goal-oriented and solution-oriented
00:16:35
rather than I need to deliver step one
00:16:37
two three four and then I hand it over
00:16:39
that makes difference between a
00:16:42
well-functioning company and one that's
00:16:45
struggling in your work you've found a
00:16:48
way to link this cost efficiency drive
00:16:50
to shareholder value I'm curious about
00:16:53
back and you tell us about that indeed
00:16:56
what we saw when we looked at it by
00:16:58
industry and in various countries it's
00:17:00
there's there's a clear correlation
00:17:01
between a three year total shareholder
00:17:04
return enter the change of the air SG&A
00:17:09
costs for sales general and Edmund house
00:17:13
which comes close to our support
00:17:15
function definition and there there's a
00:17:19
bit of the question of the chicken and
00:17:20
the egg is it good companies also have
00:17:22
good support functions or is it good
00:17:25
support functions creating good
00:17:27
companies but what we believe in is
00:17:29
there certainly a correlation between
00:17:31
being good and having good support
00:17:33
functions so whatever position you in
00:17:35
aim for good support functions and it
00:17:38
will help you drive the rest of the
00:17:41
company and their bar also the total
00:17:43
shareholder return okay thank you thank
00:17:46
you for joining us it's been a pleasure
00:17:48
to be here thanks
00:18:05
you
