When administrative costs skyrocket and services cannot be provided, a decline in support services is generally reflected across the board. However, a study involving 37 companies in industries ranging from consumer goods to financial services to energy shows that it is more prudent to strategically reduce and reallocate human resources, financial support, and logistics functions than mass layoffs. Done right, you can increase efficiency while controlling costs.
It is possible to get more benefits from back office support. In our study of 37 companies, a few simple steps can save a lot of money, but the biggest benefits come from significant changes. This is the average savings for the entire group.
Most companies have found three broad opportunities to create value while reducing support services: reduced utilization, process changes, or fundamental reorganization.
Reducing Support Services
To reduce the number, companies must simplify expected support functions and eliminate unnecessary steps by focusing on the functions most important to the customer or business. For example, reducing the number of financial statements in the ad campaigns we studied is easy. A more creative solution is to charge fees for services, such as requiring business departments to pay for reports generated through common market research functions. Typically this will reduce usage. More importantly, it creates a market mechanism that supports the most efficient and quality services. These types of changes are relatively easy to implement, and according to our research, these changes accounted for an average of 25% of total savings while strategically reducing back office costs.
Changing The Process
Rebuilding smarter support services requires companies to break down their processes. The key here is to focus on the most important processes (like financial reporting or hiring) and eliminate the steps that aren’t really driving the business. Automation is often part of the solution. In a simple example, a telecommunications equipment company provides CRM software to its sales staff so they can get real-time customer information and quotes, increasing speed and efficiency and reducing costs. This step allows the company to adjust its sales and financial management functions to manage and update customer information.
Another step is to buy better quality resources at a lower cost through a merger or tender to cover indirect costs (such as hotels and travel, cleaning and maintenance, telecommunications, and utilities). It’s generally difficult to work smarter on the right process than just reducing demand. Still, it can lead to bigger savings, amounting to about 35% of total savings, according to our research.
Fundamental Reorganization
While restructuring is the most difficult to implement, it generally has the greatest impact, accounting for about 40% of the total savings in our study. The goal is to accommodate and organize support services in various ways so that they can be performed in the most efficient way and at the lowest cost, for example, by consolidating services currently performed in various countries/regions into one service center regional common. Or move the service out of reach. Commercial department and enter the company headquarters.
Sometimes restructuring leads to outsourcing decisions. Korean insurance company Kyobo Life has added an external customer service call center so that previously supported sellers can focus on sales. The result: substantial revenue increases, a significant improvement in customer service ratings, and nearly 40% savings in back office costs.
