Routes to sustainable cost reduction – setting the right ambition

In my previous blog I offered to share a long list of savings ideas collated from our clients, and shared IMPOWER’s greatest hits for sustainable cost reduction. I also said that ambition, grip and execution (and not ideas) are the real challenges in delivering these.

In this blog I want to share some thoughts about ambition. The key point is that most of the cost reduction exercises we see are still being driven by the wrong ambition. It is helpful to think about two types of savings, and recognise that a balance of both is generally needed:

• “Now” savings that deliver rapid in-year cost reduction
• What we call “good” savings – longer-term bets with the ambition of both improving outcomes and reducing costs

Our view is that most authorities still focus too much on “now” despite results becoming harder to obtain, whereas the second is often badly undercooked for a variety of reasons, but not least a lack of confidence and ambition.

The ambition for “now” savings is often a savings target. They involve pulling the organisational levers that are closest to hand: e.g. cuts, headcount reduction, procurement savings and asset disposals. This can be painful but is relatively easy to deliver. The problem is that this sort of salami-slicing is getting harder and harder to do, and secondly that if the ambition is savings, the real-world impacts can be left to play themselves out unpredictably.

“Good savings” start with setting an ambition that focuses on better outcomes at lower cost. We have had the opportunity to work with a number of management teams on this recently. Our conversations start by diagnosing the points of leverage at which you think you can both improve outcomes and save money; figuring out how far you can push that equation and then having the boldness and confidence to really go for it.

To pick a handful of examples of ambitions set within one recent discussion:

• Reduce the numbers reliant on provided care by 10% through implementing an effective prevention and early intervention strategy that empowers local/informal support networks to maximise independence
• Increase the employment rates of those who access our services by 30% in five years
• Waste disposal cost per head of population lowest in the region
• Reduce the number of people subjected to poor air quality to the lowest level per 1000 population in the region
• To have the most resilient care market in the UK

Delivery of these ambitions means solving complex problems. There is risk and uncertainty; investment may be required, not all the levers are within the organisation, and the results aren’t “now”. But if achieved, these ambitions offer the prospect of achieving substantially better outcomes at a lower cost without the risk of hollowing out your organisation.

So how can we support our clients to confidently focus more on “good” savings and less on “now” savings? I’ll write more in my next blog about grip and execution, the tools that we use to manage delivery in complex problem spaces, and the characteristics of organisations that do this well.

This is part of our overall discussion about raising ambition for complex transformation and de-risking good savings – for which we hope to publish some thoughts in the spring. If you would like to be part of the conversation, do get in touch.