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Key aspects to a successful cost reduction program

Cost Reduction

Sometimes, and for many different reasons, companies consider the opportunity to conduct a global cost reduction program. This is a useful initiative, even after budgetary reductions by area and department. However, these programs often fail to develop their full potential for improvement. The causes are often more related to the approach and execution of the program than to the actual capacity for improvement. For that reason, we have highlighted some key aspects to take into account before starting a cost reduction program:

  • Design the program based on different projects and implementation teams involving the entire organization, ensuring that all areas are addressed with an expected improvement, and assign a manager with sufficient time.
  • Train managers and project team members in project management skills such as potential analysis, project design, activity planning, allocation of responsibilities and goal setting.
  • Conduct a preliminary analysis of potential cost improvement in order to accept or discard projects within the program, without rejecting viable projects due to their size.
  • Ensure the objectives are sufficiently ambitious and balanced between the different project managers.
  • Ensure management support and establish appropriate communication channels and coordination meetings to monitor projects and their results.
  • Analyze potential implementation risks and plan contingencies in order to minimize problems in the development of the program.
  • Properly prepare the launch of the program by gathering all the necessary information and ensuring that all members of each team clearly understand the objectives and their role within the program.
  • Continuously monitor the results through a project management system, communicating the achievements to the whole organization, and giving visibility to the Management.
  • Exhaust the projects’ progress by establishing successive improvements until the potential is fully achieved, before proposing new cost saving initiatives.