Achieving sustainable cost reductions in public sector operations

B2B Editor1 September 2014

Achieving sustainable cost reductions in public sector operations

With a sluggish economy and additional budget restraint on the horizon, many government agencies and departments need to find more cost savings and business efficiencies. After shedding jobs and freezing recruitment, how can agencies and departments achieve long-term cost savings? RSM Bird Cameron explains how.

“It’s not simply a matter of getting by with less,” says Luke Williamson, Senior Manager, Assurance and Advisory Division. “From day one, we work with agencies and departments to build a culture that is ‘cost conscious’ so that staff are aware of and can take charge of the costs in the things they do. This change to organisational culture is the key to achieving sustained lower cost operations.”

“It might be a matter as simple as questioning why correspondence is being sent by post when it could be emailed, or why cheques are being drawn when payments could be made by electronic funds transfer,” he said.

“On the whole, public servants work hard to execute processes efficiently, but typically they’ve had limited opportunity to suggest change to processes that have become entrenched in their organisation’s daily operations. Adopting a cost conscious culture means empowering staff to suggest cost reductions or performance improvements which can deliver significant savings to fund business re-engineering.”

Luke and fellow RSM Bird Cameron executive Thomas Pucci bring with them close to 40 years of local and international advisory and consulting experience across portfolio areas such as health, human services, border security, transport, taxation, and defence. They specialise in solving complex problems in the public sector and have led significant cost reduction programs for a number of agencies and departments; both big and small.

RSM Bird Cameron is also well placed to work with agencies and departments who have geographically dispersed operations and customers as the firm has a large regional presence across Australia.

Achieving sustainable cost reduction

Taking a broad organisational perspective is central to achieving significant and sustained savings. This means considering the efficiency of existing business operations across corporate and operational functions as well as the efficiency of working capital. The key areas to focus on include people and cultural performance; business processes efficiency and the use of technology. See Table 1.

In seeking to achieve sustainable cost reductions, it’s important to not only examine individual areas or business units, but to focus on cross-organisational processes and organisational structure with a special emphasis on reducing complexity; especially at process hand-over points between business units.

A typical sustainable cost reduction project has three dimensions and delivers results throughout an 18 to 24 month timeframe. See Table 2.

For most organisations, RSM recommends a combination of methodologies and strategic analyses when considering sustainable cost reduction, such as using their modified LEAN and/or Six Sigma methodologies. LEAN is a management philosophy made famous by Toyota and focuses on eliminating waste to improve overall customer value, while Six Sigma focuses on quality and getting costly activities executed right the first time.

Cost savings examples

1. A review of a government agency’s recruitment function revealed that it operated a ‘fire house’ model, where its recruiters would leap into action when a position became vacant. This in-turn had led to resourcing levels designed to meet the ‘peak load’, with the recruitment team often finding work to keep themselves busy when the fire bell was quiet. A LEAN based review proposed opportunities to dramatically reduce costs by more than 70% which improved the ‘time to hire’. The principle strategies adopted included a change from just ‘recruiting for a vacancy’ to one of ‘recruiting for forecasted vacancies’ with the adoption of less bureaucratic processes to hire candidates.

2. A review with a hospital found that significant savings could be made through the optimisation of its large workforce of non-clinical technicians (electricians, plumbers, IT network engineers, etc). The change commenced with a review that demonstrated that most technicians only spent around 40% of their time doing work or repairs. The root causes – poorly designed maintenance schedules had led to a high rate of unscheduled maintenance, task planning that did not consider the impact of staff moving between jobs across a large campus, loose responsibilities, and a culture that over-prioritised labour budget management (i.e. overtime minimisation), rather than efficient job completion.

Arranging for a review

RSM Bird Cameron can undertake sustainable cost reduction reviews for customers Australia-wide. A typical review takes between 4 to 8 weeks depending on the size and complexity of the organisation.

Please contact: Luke Williamson or Thomas Pucci in the Canberra Office to discuss your needs

on 6217 0301 rsmi.com.au

With RSM Bird Cameron you really are… Connected for Success