Crunch time and the best way to handle it

Now is the time to consider what your organisation should do ahead of major Government spending cuts, Leslie Kossoff advises.

Leslie Kossoff offers advice on how to handle the cuts that may be ahead - image: Istockphoto
Leslie Kossoff offers advice on how to handle the cuts that may be ahead - image: Istockphoto

It is a brutal economy. Even if you are a corporation in good shape, at some point you are still dependent on someone buying what you have to offer. And when the concern becomes that China's economic growth may slow from nearly 12 per cent annually to "only" eight or nine, well, even that raises red flags for corporate executives everywhere.

Because, as we learned in 2008, this really is a global economy and every economic move in any country impacts everything and everyone else worldwide. To those in the UK public sector, however, what is going on in the private sector is baby stuff. Most organisations, when they are hit badly, are told to cut expenses by 10 to 15 per cent, not 25 and not across the board as though no department has any more or less value or impact than any other.

So it is time to talk about what to do when the crunch comes - and while this focuses on public sector players, it applies across the industry, to everyone. In fact, this process is one that every organisation should go through regularly, but most do not.

Moreover, when you are doing it in the crunch, the tendency is to be less objective than you would like and, more importantly, than you need to be. So, while knowing that the context is the crunch and the cuts, look at this process as a means to survival and success because that is what you are really doing.

What is your value proposition?

From chancellor George Osborne's perspective, anything that brings "significant economic return to the country" is good. Anything else, in its most simplistic terms, is bad and up for the cut. The higher than expected departmental cuts and simultaneous freeze on council tax just makes it more important that you figure out where your value is - and to whom.

Here are the questions to start with:

- Who are our various customer constituencies?

- How are their needs, expectations and attitudes alike? How do they differ?

- What is each looking for?

- How have we fulfilled those expectations in the past? Exceeded them?

- Of those actions we took that fulfilled and exceeded those expectations, which were our "core" business and which were add-ons?

- Of those two groups of actions, which were the ones perceived to be of greatest value to our customer groups?

- How do we know? What measures do we collect or are provided by others that demonstrate, whether quantitative or qualitative, our value?

For example, if you are a parks department, you cannot look at your value proposition based on the maintenance services you provide. Instead, look at how you have impacted the increase in allotments in and out of parks or developed play areas or recouped land to create micro-parks of green spaces that enhance everything from aesthetics to property values in your local area.

For growers selling into the public sector, it is the price, availability and responsiveness of your network and supply chain in providing exactly the right foods in the freshest, best condition at the greatest nutritional values at exactly the right time - every time.

Even more, it is your nutritionists and researchers working with the public sector bodies buying your product - whether NHS, local schools or senior centres - to help them make the best decisions on what to use and when, that makes you even more valuable to them.

Value propositions, by their definition, are about helping your customers to succeed. Your success is doing what you do to make them look better, live better, operate more successfully and be better perceived by their constituencies. Keep in mind, local governments and other public sector providers are under the same gun as you.

The difference is, you are helping your compatriots succeed - as long as you position it that way. After all, the populace that is watching everything the Government is doing wants you to keep doing what you do best, no matter what your budget.

From value proposition to cost reduction - non-core services

Now that you know where you can make your case for the biggest bang for their buck, you should take a good, close look at what you are doing. It is a sad fact, but not everything that everyone does in your organisation either does add, or has probably ever consistently added, value to either the services your organisation provides or how they are provided.

That means cuts. But those cuts are on your terms. There are a number of ways you can play this. Shared services is an easy one to start with and to grow. The previous Government began this trend a number of years ago, taking back office functions and creating a single service to fulfil the needs of numerous organisations so that they could concentrate on what they do best. That is their front-line services. That is where the value is to the populace.

Take a look at what your organisation is doing and how much time is spent on administrative work that adds no value. Figure out, first, whether those actions are actually necessary and, if so, whether there is a shared service already established to which you can hand them off.

Be ruthless in looking at the necessity of the tasks. In Government, because bureaucracy is an art form, tasks are established and then perpetuated for time immemorial. Just think about the reports you generate or those you receive. How many of them are actually needed or read? How many do you read or just pass off to the next person or bin, electronically or otherwise? That is waste and those activities can go.

For the ones that stay, again, be ruthless. At the senior levels, you are expected to understand, strategise and manage budgets. But do you really need an accounts department? What about training? Purchasing? HR? What can you either outsource or get rid of altogether? Do not just look in your own local area or even in your own functional arena. Look everywhere. What does the Ministry of Defence do? How about the Department of Health? Defra? The Department for Business, Innovation & Skills? The next county?

Even better, if no current shared service exists, get together with your compatriots and make the case to establish one. Cuts are cuts but when they come with productivity gains, which consolidation can do when managed correctly, the cuts are a front-line gain to the organisation. And never forget, that is what you are there to do - provide front-line services. Everything else is the backdrop and infrastructure to those services.

From value proposition to cost reduction - the front line

Which leads us to the second aspect of moving from your value proposition into the cost reductions of your choice: Are you investing in the highest-value front-line services? Here are some of the questions you need to be asking, always keeping your value proposition in clear sight:

- What front-line services do you provide?

- Are they visible and valued by your customers?

- How is the value of those services measured?

- To what extent do you have the local population involved and contributing input into how to improve those services even more?

- How innovative are those services? Are you cutting edge or run of the mill?

- What do you need to do to ensure that you are consistently wowing your customers - Government and citizens - with what you have to offer?

Every service you provide has a cost. That is the easy part. But if the value of those costs is either unknown or more valuable to you than to the community you serve, then the ROI on those costs is too low to justify. That makes them perfect opportunities for cuts.

The good news is, when you bring those ideas forward and demonstrate your willingness to make cuts that your local council or Whitehall might never have considered, you are showing that you are onside. You are a player. You understand the challenges they face and are willing to take the hits. All the while you know that you are working your own agenda anyway (shhh - don't tell). Which leads us to two final issues for your consideration - survivors and structure.

Protecting the survivors

Some of your people are going to go. They may leave on their own. More will probably be made redundant. You will do your best for them. Make sure they get the best redundancy package possible. Work with their unions to keep things as smooth and painless as possible. They will be missed. But just as much as the people who leave, the ones left behind need to be protected too, only instead of giving them a good separation package, you have to help them deal with what it means to stay.

They will have far more work than before. Tasks that used to be shared will now be assigned to only one person and some that they never had to do will now be on their plates. This is also why it is so important, starting now, to determine which tasks can be outsourced or discontinued altogether.

They will be missing friends and colleagues. The person they turned to when a question came up may not be there any longer with the necessary information, or for a good laugh at a shared, inside joke. Sure, there will be those who are happy to see some of the "waste cases" go, but they will be in the minority. Because even when they did not think that one of their colleagues was doing a good job, no-one wants to see anyone out of work.

Many will feel relieved for still having their jobs and guilty for the fact that they feel relieved. They will not quite know how to talk with their former colleagues or whether it is a good idea to get together for a lunch or even to mention news of the organisation when they get a phone call, which they will. The people who are still there are the survivors. What makes it worse is that they do not know how long they will survive.

That is the culture you will be managing. You need to be aware of it now because it has already begun. Everyone is wondering whether it will be their job or their function that will get the chop. They will be distracted and emotional. They will be angry and scared - and the ones who survive will stay that way for quite a while.

Start identifying, now, all the resources available to help you and your crew through this. The more you focus on helping the survivors survive with grace and balance, the faster you will be able to point the organisation in the direction you want it to go.

Structuring opportunity

Finally, there is one other option that is available to you - social enterprise. The Government has made clear that it wants to get as much cost off its books as possible. In some cases, such as schools and the NHS, it is actively creating opportunities for new social enterprises to be established. That opportunity exists for you and your department as well.

When large private sector enterprises become too unwieldy, they either sell off parts of themselves or spin off subdivisions that are wholly or partly owned. It is that latter opportunity that you should be looking at - spinning yourself off.

Face it, a lot of your costs of doing business are not ones that are in your control. You know you could provide the same services better and for less money. The problem is you are locked into a system that says what it is going to cost for you to exist.

Counter-intuitive as it may seem, you can create stand-alone social enterprises from Government departments. And now, with all the support that the coalition Government is providing toward that end, there is no better time to grab that opportunity.

It is your call. The given is that the cuts are coming. The question is how do you want to turn that proverbial lemon into the sweetest lemonade you ever envisioned, whether within or outside of Government? L

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