In his latest blog accountingcpd.net author Brian Plowman takes a look at how you can rebalance resources within your organisation, and the surprising benefits this can bring.
At the heart of the approach you need to ask a series of questions focused on:
Restructuring (to change the level of tasks) and on
Reengineering (to remove the causes of process failures).
By thinking about activities in different ways it is then far easier to make changes across an organisation in a structured manner, looking at the relative merits of making reductions in some areas and increases in others.
The discipline of asking specific questions about each category of activity ensues that everyone is focused on reducing costs and improving service levels. Generally the outcome re-balances costs but re-using the spare capacity generated to increase ‘core activities’ to deliver enhanced business benefits and to increase ‘support activities’ to handle increased volumes.
In many cases there may not be an overall reduction of costs but the business will be using its current resources far more effectively and handling greater volumes with no increases in costs.
Sources of data
You need data so you can ask the right questions which spur actions:
The glaringly obvious things to tackle. They may have the ‘elephant in the room’ characteristic as people have been fearful for whatever reason to raise the opportunity to make a change.
Comparison with others. There may be benchmarking evidence from within the same sector or with another that suggests that a significant cost saving could be made.
Internal analysis of processes and activities. Involving managers and staff is key to getting to the heart of what is currently being done rather than what is believed to be being done.
Use the sources of data to ask the series of questions about the level of tasks.
If rapid cost reduction is a short term imperative (ie early staff cuts, zero base budget) then you may need to ‘leapfrog’ reengineering.
However you will need to follow quickly with reengineering to create spare capacity so the staff that are left can cope without a major risk to service levels.
Most noise activity is driven by process failure upstream of the function in which it occurs. So the process failure which requires an accounts clerk to raise a customer credit note is likely to have occurred elsewhere, not in the accounts department. Finding the ‘noise driver’ and fixing that root cause frees up the noise.
Raising the profile of noise drivers is a way to increase the chances of getting things right first time by placing clear standards of performance on each function in the process chain.
"Our department could save time or use it better IF the output from XYZ group were on time/ correct/ more detailed ... IF we had authority to act .. IF the task were transferred out of our area .." and so on.
Once the required standards are established, the functions identifying the noise drivers can quantify the noise activity they will save. Likewise, the functions complying with the required changes to their outputs can assess what extra resources, if any, they will need.
An Accounts Department spent much of its time painstakingly checking all data supplied to it by an operational group. Errors were frequent. No-one had thought to challenge this working relationship. It transpired that Operations had no idea of the problem it was causing.
Operations changed its method of data entry, ensuring that the data was accurate first time round. 23% of the Accounts Department's resources became available to become a saving, or if identified, to address any issues raised as a conditional benefit if the Accounts Department did something differently or to a higher standard.
When the conditional benefits are strung together along a process it is often the case that a simple enhancement at the start of the process can cause a cascade of improvements in every function downstream.
Service level change
We saw in an earlier section that when considering Value-for-Money, opportunities for service level change require a careful evaluation of risk and benefit to the business. This becomes a more difficult issue to tackle when external customers are likely to be affected. Sensitivities are particularly acute when service level reductions are made; gains in organisational efficiency may risk external customers being adversely affected. Equally, the organisation will wish to ensure that an increase in service level - particularly one that will absorb more internal resource at no increased cost to customers – will generate increases in profitability.
The review encourages people to think hard about the way they operate and to suggest radically different ways of doing things. How could they manage with significantly reduced resources and yet adequately accomplish the key tasks the business demands of them? What could they avoid doing if others did their jobs better? What important business needs could be met if they had more resources? What improvements to systems and processes would benefit the business? The outcome is not merely an overall reduction in cost. A shift from noise to core and support activity occurs, as the organisation reduces failures and the number of unnecessary tasks, and concentrates instead on meeting key business and customer needs.