Cost savings initiatives come and go and in the aftermath of all that apparent cost cutting, how do we assess the success of what we’ve done?
All too often, success is declared based on spending not increasing. That’s not saving money. That’s holding the line.
You may well gauge the success of a cost savings initiative according to the amount of time expended. If you save time, it’s arguable that you’ve saved money. The same may be said of increasing efficiencies. But were costs a reduced? Did a line item shrink?
You’re still paying all the people involved in the initiative and in most cases, those people aren’t being paid by the hour. Do the math – that’s not cost savings.
This post is about how to increase the effectiveness of cost savings initiatives in the second half of 2018. You started out the year thinking you’d get there and you still can.
Real cost savings
The only real cost savings that mean anything are those which directly and visibly reduce specific line items in the budget.
If your cost savings initiative is, alternatively, avoiding costs, that’s not the same thing. You’re addressing the numbers on the balance sheet. When you’re done, those numbers should be smaller.
In your planned spend are the seeds of real cost savings.
Widen the scope of your quest
Kicking off a cost savings initiative with one large target in mind may seem attractive (even heroic), but success will be had in widening the scope of your quest.
To begin with, lopping off chunks of one item is bound to de-stabilize the integrity of the target. Cost savings are best distributed throughout organizations to reduce impact that might have such an effect.
Instead, choose at least 10 targets with smaller goals which add up to the kind of cost savings you’re seeking. Aim for areas in which minimum impact delivers lower-value cost savings. Cost savings initiatives which operate from this principle tend to be more successful, as they aim to streamline, integrate and eliminate extraneous or obsolete functions.
Incremental cost savings approach the project by looking at ways non-mission-critical expenses can be reduced. If your company holds training days, find ways to combine these with seasonal celebrations. One event costs less than two.
Another consolidation effort is in personnel. We all know this is true – that every company is home to employees who aren’t as busy as they might be. Underperformers who’ve made it through previous cost savings efforts can be given more to do and the duties of roles left vacant to spare payroll can be divvied out to them.
Procurement is a key area in which superior cost savings can be had through enhanced efficiencies. One of the most effective ways to achieve that is with a Group Purchasing Organization like CenterPoint. You join with other members to enjoy bulk discounts and major savings.
CenterPoint Group is your best bet for cost savings in 2018. Contact us.