Organization & Transformation - Nonprofit Organizational Efficiency Capacity Building
Project Example | Nonprofit Organization & Transformation
Cost reduction capacity building
Context
My client was undergoing a large cost-reduction transformation. Its leaders knew that to simply scale back commitments would be to take the easy way out, and they knew that arbitrarily cutting budgets without a plan was unwise. Instead, they sought to be deliberate about identifying and capturing cost savings with minimal impact to the organization's mission.
Key Question
Can you help us build the capacity to identify and capture opportunities for strategic cost reduction?
Solution
I partnered with client leadership to design and launch a capability for cost savings identification and capture. My support included:
- Design of the savings capture process.
- Development of a playbook to guide managers in identifying and planning for cost reduction opportunities.
- Development of tools to support analysis and data management.
- Produced internal communications materials to support rollout.
- Provided coaching to client leaders to ensure successful rollout.
The key to success in this process involved embracing the notion that:
- You can be strategic when cutting costs. There are three relevant categories of cost: lights-on activities, table stakes activities, and differentiating activities. Lights-on activities include the most basic costs needed to be open for business (e.g., utilities). These should be aggressively minimized. Table stakes activities are those required to operate your organization's "business model" (e.g., administrative functions such as HR and IT, travel, etc.). Table stakes costs should match but not exceed what is needed to remain competitive. Costs associated with differentiating activities are those that directly drive your organization's distinctive value proposition. These costs are what give your organization a reason to exist, and may even be increased during a cost reduction effort.
Results
This work enabled my client to proceed with an ambitious cost reduction transformation targeting double-digit savings in overhead.
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