Cutting the fat from business processes

Have you ever wondered whether your organisation could do more with less but are unsure how? Have you ever considered why your competitors can beat your product offering a fraction of your price and still make a profit? Are you plagued with excessive bureaucracy and red tape in getting things done? Then you might be suffering from ‘Organisational Obesity Syndrome’.

Companies facing organisational obesity are frequently victims of their success.

Exponential growth in their demand places major tensions on their production capabilities, so that “delivering at all costs” becomes their new maxim.

This results in the creation of layers of fat, which continue to add on to the cost of providing a product or service.

While the organisation builds further weight in its cost structure, a buoyant demand in the market still keeps it afloat.

As an industry reaches maturity stage, however, the weight of the organisation fat developed over time starts to sink in.

Such organisations have no option but to go on a cleansing process to burn the excessive fat in costs without impinging on the overall quality and reliability of the product or service to the customer.

Burning organisational fat may frequently be thought of as a relatively simple task by an inexperienced manager in this field. From our experience, most managers not formally trained or experienced in cost reduction programmes or corporate turnarounds frequently end up adopting value-reducing measures such as replacing high quality materials with inferior substitutes, reducing counter staff serving clients with a negative impact on queuing time, reducing maintenance with a resulting deterioration of the productive assets or reducing marketing budget thereby reducing sales potential.

Such cost-cutting measures have an adverse impact on customer value which could, in turn, jeopardise the competitive position of the organisation in the market place.

Such measures would effectively starve the organisation from much needed muscle to pull its weight in an increasing competitive market place until it could potentially lead to its own death. We call this phenomenon ‘Organisational Anorexia’.

Best practice cost-cutting strategies require a targeted approach.

Business processes are streamlined on the basis of factual information made available through management information systems on the core processes’ performance. In practice, however, it is recognised that very few organisations can afford the investment or have the scale required for operating advanced business intelligence systems.

There are other practical methods to acquire information on process performance using proxies to generate estimated indications.

These will help decision-makers better locate those processes which have the highest potential for improvement.

BEAT Consulting, in collaboration with the European Institute of Education, is organising a one-day, case study-based training programme on Wednesday.

The event will provide a practical platform through which pragmatic means of achieving high-yield cost reduction targets will be explored and discussed.

The programme will be based on a documented case study that will be distributed to participants. Information is available online at www.eiemanagementcentre.com.

Mr Galea is chief executive of BEAT Consulting, a niche-based firm focusing on assisting clients to trim their costs, boost sales, and formalise structures.