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Cost reduction with OrgVue

Cost reduction is the number one challenge facing businesses today. And cost means risk. If cost reduction is managed well, the risk is low – but there’s the possibility you’ll cut the wrong people and resources, or that a reduction could lead to higher costs in the long term. Organizational Planning and Analysis can help.

Cost reduction doesn’t work

The way organizations go about cost reduction today doesn’t work. When they discover the business is ‘overweight’, they resort to sweeping cuts with little visibility of the skills and capabilities being lost. Later they realize they can’t meet their revenue targets and begin to rehire the same people, often on expensive contract terms.

It’s also generally accepted that you can reduce cost by increasing span of control to slim down the number of managers and layers in the organization. But again, this delayering is often done without considering the skills and capabilities that could be lost in the process.

This ‘yo yo’ effect of event-driven workforce planning will slowly but surely stifle the business. As it stands, cost reduction is about efficiency, not effectiveness. But we can fix this.

Span of control

Span of control is recognized as a practical way to improve organizational effectiveness and reduce operating costs – if you can get the number right! But what experience has shown is that there’s no single number that companies can apply to get the best results. Learn more…

‘Work and value’ not ‘people and cost’

A better way is to look at the work people are doing, because you need to understand who’s driving profitability. To bring visibility and control to workforce planning, you need to take both supply (HR and Operations) and demand (Finance and Sales) into account.

All of this comes back to automation, collaboration, and software product, working together continuously to focus on activity rather than roles. Activity analysis provides a richer context for managing costs, and consequently risk, based on the work being done.

OP&A: the way to sustainable cost control

OrgVue has the analytics and modeling capability to shift cost reduction from being event-based exercise to being a clear, iterative process.

We call this organizational planning and analysis, or OP&A, and like FP&A, this should be an in-house discipline that you do constantly. It may seem overwhelming at first, but it’s a capability that will evolve over time and will eventually become embedded in the fabric of the business.

Making people count

2019 workforce analytics research report

Rethinking workforce planning for a disruptive age: OP&A leads the way

For more information on OP&A, read this article by Rupert Morrison