Sustainably reduce overhead costs through objectification

How can overhead costs be sustainably reduced?

How do winners reduce overhead costs with a short-term implementation guarantee and sustainable efficiency gains accepted and value-stream-based instead of pure top-down budget cuts?

Substantial improvement of the cost situation as a goal

Substantial and sustainable improvement of the cost situation and the structural efficiency of overheads and the reduction of dependent secondary costs through productivity increase, low-key overall planning and delivery reliability.

Approach: Objective discussion along functional analysis

Objective discussions with all functional managers concerning the current value creation of services and the approaches and capacities used for this purpose, resulting in optimal structural efficiency.

This hypothesis-driven approach has the advantage that an enthusiastic framework is quickly created by the very managers who will then provide the necessary assessments and arguments to validate and implement the savings effects. They become part of their own functional solution right from the start. Even simpler: they are the solution.

Successful functional managers are provided with effective methods for reducing overhead costs. The “functional analysis light” method helps to “springboard” the criteria needed of employee capacities and  personnel requirements. The cooperative assistance of HC controlling (CHRO) and financial controlling (CFO) is essential.

The identifiable operational activities and range of services, along the previously selected initiative framework, as well as their comparative  employee capabilities (FTE) supporting these activities, are evaluated by objective discussions with divisional and departmental heads with regards to:

• little to no value-added
• overlapping, fragmented and idle
• redundant or obsolete
• manual instead of automated
• ineffective or incorrectly allocated
• repetitive, transactional and batch processable.

Once accepted, recommendations to reduce or even disband tasks can lead to new business ideas. This can lead to synergetic bundling, digitisation & automation, relocation of business shared service center applications in best cost countries.

Discussions, which up until now had been accepted and not tied to certain persons (full names), will make it possible to allow to identify synergy and efficiency potentials within the best qualified departments. These are captured in an overhead reduction business plan which include measures relevant to the social plan.  And this in accordance to a micro/internal and macro/cross-functional view.

With the help of a special transfer matrix, the translation of developed results on an anonymous FTE basis into real names, can be continued in a credulous combination of social partners, employees and managers. They will be involved from the outset.

Two success factors

The speedy identification of potential to reduce overhead costs through a hypothesis-driven approach. High implementation guarantee through objective discussion of executives who see themselves as part of the solution.