www.pwc.co.uk/consulting
Reducing cost
Create savings that last
Looking at cost differently
The recession shows no sign of ending soon. Growth is still stagnant, and traditional
methods of cost cutting like reducing headcount and support functions are failing to
improve profit margins. Companies must take a fresh look to tackle the cost agenda.
Challenging management to change
We believe organisations must move beyond tactically
cutting costs. To stop costs creeping back in, you have
to start by changing ingrained management beliefs.
Once management is on board you can focus on what
to do to bring the most savings. Then through the
right structural changes across your organisational
and operating model, you will be on course to
deliver longer-lasting savings, ready for when the
market picks up.
So how do you do it?
We start by working with your executive team to
create the right leadership model, and management
beliefs to guide your organisation. Once management
is clear of what can be achieved and how everyone
will be rewarded, you’ll have a much easier task ahead
to really tackle reducing cost in your organisation.
Are you seeing the high cost of bad
behaviours?
• How difficult is it to unpick organisational complexity
built up during periods of growth?
• To what degree does a lack of transparency prevent you
from seeing the true costs in your business?
• Are you focusing on the most significant and difficult
opportunities, beyond the obvious?
• How much are politics, vested interests and behaviours
impeding objectivity and decision-making?
• Does your organisation have the right skills and
experience to make a step change in its cost structure?
83% of UK CEOs plan to implement
a cost reduction initiative in the
next 12 months
PwC CEO Survey 2013
Figure 1: Make significant and sustainable savings
Strategic
Restructure costs
g ty
in ili
as ab s
e
n
cr i g
In sta vin
su f sa
o
Create efficiencies
Do different
20%+
Do with less
savings
Type of savings
15-20%
Cut costs
savings
Do better
10-15%
Do without
savings
5-10%
Tactical
savings
Embed cost control capabilities and behaviours
3-6 months
6-12 months
Time to realise savings
12-18 months+
Right approach: Many organisations limit their focus to ‘doing
without’ and ‘doing better’ by only addressing the most visible
costs and efficiencies. The next step is to make more significant
and sustainable savings by focusing on ‘doing with less’ and
‘doing things differently’. That means a more strategic approach
to reducing infrastructure and restructuring the cost base (see
figure 1).
Right ideas: Look at the largest components of business costs –
with the greatest potential for savings – typically property, third
party spend, IT, staff costs and tax charges. These form part of
our playbook (a catalogue of over 50 ways) to reduce costs – each
with tried and tested savings ideas.
Right behaviours: To deliver these changes, set up an office of cost
control. From our experience, this can make all the difference to
the success of your programme. It creates and embeds new
capabilities that will deliver a lasting change in your
organisation’s behaviour to make sure you get the costs out and
keep them out.
The benefits to you
Significant benefits are to be gained by taking a strategic approach to cost reduction:
• Up to 25 – 40% reduction in the cost base maintained for the long term.
• A new and flexible operating model and organisation structure better able to respond to new
market realities.
• A restructured cost base, aligned to the new operating model and sized to support the future shape
of the business.
• A cost conscious mindset, amongst all your people, driven by new skills and behaviours, resulting
in ongoing improvements.
• Recognition from external stakeholders for savings achieved which can be independently verified
and realised at a P&L level.
• Self-funded programme by making savings early on.
“The PwC team have been outstanding – we could not have
realised the scale of benefits we had without their support.”
Executive sponsor, COO, FTSE100 client
Client success stories
£175m savings for global manufacturer
Our client faced growing market pressure to reduce costs. With Board
sponsorship, we helped identify over £175m savings across the whole
enterprise including engineering, manufacturing, maintenance and support
functions. We developed the case for change and options for the board to
release sustainable savings as improvements to the operating model.
30% drop in cost base for global investment bank
Under significant pressure from regulators, this failing bank had to
strategically realign their cost base. To deliver the scale of savings required,
we worked with the bank to review the operational, commercial and
technical dependencies globally. We helped to redesign IT infrastructure
and datacentre hosting 126 critical applications. As a result, we delivered a
80% drop in application and infrastructure support costs and sustained
savings of 60% in restructured market data feeds.
Contacts
Chris Samson
+44 (0) 7718 865185
chris.samson@uk.pwc.com
www.pwc.co.uk/consulting
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