The client’s challenge
- A major European utility company has recently been divesting a large share of its business to free up investment resources needed to grow their other business portfolio, e.g. within renewables.
- As a result, the number of employees working in business operations roles decreased substantially. However, the number of people employed in staff functions (IT, Finance & HR) as not decreased to the same extent.
- The high costs of staff functions had become an issue as the market development with significant price erosion put additional pressure on company profit margins.
- Therefore, the Executive team decided to initiate a review of all its staff functions to find new more efficient ways of working and to reduce costs significantly.
- Defining the cost baseline for the individual staff functions has been a time-consuming task because roles and responsibilities are not defined in a consistent.
- The needed benchmark would have taken way to long and the risk of comparing ‘apples to oranges’ would have been to high.
- A ‘cheese slizer approach’ was not sufficient, that was way a fundamental re-thinking of ways of working was needed.
- Agreeing on to what extent the future role of corporate staff functions should be to steer and govern only, or if providing services to the business.
- Determining responsibilities for taking out identified savings related to initiatives that focus on cross business area opportunities e.g. process harmonization and simplification.
- Setting up an appropriate way of tracking implementation of program initiatives.
- The needed benchmarking study was outsourced and performed by an experienced global consultancy (13.000 benchmarks). Therefore, the study itself took only a couple of weeks to complete.
- The benchmark consultancy avoided comparing incomparable factors to the largest extend possible while focusing not only on cost but also on equality, effectiveness and efficiency.
- A program management team was set up consisting of internal resources and external consultants to analyze the current situation and develop a transformation plan.
- The benchmark was only used by executive management groups to decide on cost reduction targets. Getting the right people on the team has been key to drive the program forward.
- The people assigned to the program project team are all senior employees with extensive leadership and functional area expertise as well as strong internal networks. They have had the ability to hit the ground running and quickly add value to various critical issues that have come up during the fast-paced work process.
- After a benchmark study of the efficiency and effectiveness of the company’s staff functions combined with other internal cost data a reduction of the combined cost by 30% was targeted.
- A common view in the Executive team and within the organization what needs to be delivered from the program and why was gained.
- The necessary initiatives to achieve the 30% target has been identified. During the coming two years, these initiatives will be implemented and during 2020 the cost reduction shall be delivered.
- Engagement among many employees in identifying and detailing initiatives to reach the overall ambition as well as significant savings potentials have been identified within most of the staff functions IT differs from function to function among the 28 staff functions in scope of the program.
- To achieve the target some services will need to be scaled down. Service levels in general shall not be degraded but rather improved through digitalization, process redesign, clarified roles & responsibilities etc.