Other parts of this series:
In the last part of this series, we talked about short-term tactical levers and long-term strategic changes that financial organizations can use to achieve sustainable cost management. But, identifying solutions is not enough. The majority of cost reduction programs do not fail due to lack of recognition of opportunities or a vision, but because of barriers to delivery that can feel insurmountable.
One obstacle to delivery of cost reduction programs is an inability to clearly define benefits and track progress across areas of the business and executives, which leads to loss of momentum and purpose.
Another challenge is the legacy infrastructure (applications, data, hardware, office space, branches, people, processes, reporting etc.), which are complex and difficult to unwind without generating risks and further investment needs. Often the legacy in a rate limiter to cost reduction.
The following seven priorities are necessary to overcome barriers to delivery and to produce the required changes:
- Ensure strong executive governance. In order to support the planning and tracking of cost reduction targets and to measure overall success, clear ownership of metrics and regular reporting of progress is essential.
- Create a common understanding of success. According to Accenture’s ChangeTracking research “vision and direction” is 3 to 4 times as important as any other intervention in the realization of the benefits of a change program. Set a clear vision, one that is aligned to the strategic objectives of your financial services organization, so there is a single understanding of success.
- Prioritize decision-making. Clarify executives’ decision authorization and roles, and define a clear, evidence-based decision-making framework to drive key decisions throughout both the planning and delivery phases of cost reduction initiatives.
- Build and capitalize on momentum. Tactical cost-saving initiatives can build momentum and release investment for new capabilities that enable strategic reduction of the cost base. For tactical, small-scale change, using agile sprints to deliver small packets of incremental change is an effective way of reducing the time to deliver and taking small elements of cost out of the business quickly
- Manage the end-to-end journey. Regularly communicate the results of what can be a multi-year transformation journey with senior management, employees, the media, shareholders, customers and regulators. Tailoring a message to each group is key to maintaining strategic alignment of investments and measuring progress along the journey.
- Track and control changes to the overall operating model. Define your interim and end-state organization operating models as you transition from a high- to a low-cost profile. At the end of each major cost reduction initiative, bring the changes made by different programs back together by analyzing the impact of all initiatives on your overall operating model, and work back from this end state when planning a coordinated set of organization-wide cost reduction initiative
- Re-engage the retained organization. Accenture Change Tracking research shows that there are two primary drivers of sustainable cost management: accountability and positive feelings. When confronted by a workforce demotivated by cost cutting, invest in training, creativity and innovation programs in order to lift team spirits and kick-start performance.
The successful attainment of cost reduction targets requires a well-defined understanding of success, along with strong phase control, governance and stakeholder management. The traditional firms that follow the seven steps outlined above will be the ones achieving the transformation need to compete in the emerging FS marketplace.
To learn more, register to download the report: Piling off the Pounds in Financial Services