What challenge(s) do our clients face?
Setting clear and fair targets, and defining the initiatives required to meet them
There are many different drivers for organizations to chase greater efficiency – from poor financial results, to mergers or the entrance of new competitors challenging current position. Understanding the motivation behind an efficiency push is fundamental to setting the rules of the game, as the more critical the situation, the more aggressive targets should be and, by association, the higher the risk and disruptive tactics the organization will need to accept.
From our experience, the search for efficiency presents the same challenges across geographies and industries:
- Clarifying the ambition and purpose of the project for the business
- Setting a clear and appropriate reduction target based on the size of the gap and appetite for risk
- Ensuring leadership understanding, buy-in and alignment throughout the process
- Identifying efficiency initiatives beyond the status quo, and encouraging the organization to think differently
- Prioritizing initiatives and developing a feasible implementation plan
- Managing execution and financial timelines in a structured way, guaranteeing the involvement of key stakeholders and an effective decision-making process
- Communicating regularly to the team, balancing the need for transparency with the risk of inducing anxiety or creating gossip
- Constructing a clear implementation plan with governance to ensure delivery against fair KPIs
Efficiency and cost reduction projects require leadership to look at the business through a different lens, putting business needs above the interests of specific teams or functional areas. These initiatives require tough and unbiased decisions – so beyond the actions themselves, success depends on alignment between leadership on the company’s direction and goals, and commitment to follow through until financial targets have been reached.
How do we help?
We work together with you throughout, from target setting to full implementation of cost saving initiatives
We support our clients by providing a structured approach and an external perspective by:
- Assessing the current business strategy and performance against objectives
- Defining the appropriate level of aggressiveness to close gaps, and translating it into clear targets which make sense in the business context
- Bringing external best practices and facilitating internal workshops to map the actions which fit the needs and constraints of the organization
- Conducting numerical analysis to prove viability of ideas (business cases, volume driven analyses, out-sourcing or in-sourcing alternatives)
- Supporting the leadership team to make informed decisions on different risk scenarios
- Building feasible financial and implementation plans based on investment and resource availability
- Preparing and launching the governance to track execution and opportunity capture, supporting fast escalation of risks and issues, and enabling adjustments that keep the project on plan
- Implementing change management actions to minimize resistance and bring the team along, throughout the journey
What are the benefits?
Done well, efficiency and cost reduction projects can bring more benefits than just immediate financial gains, such as:
- Deeper understanding of different efficiency levers: wide map of potential initiatives to consider within the project, and in future projects, based on cross-industry references and data analysis
- Better alignment among leadership: ensuring connection to strategy, understanding of needs and building commitment to implement the changes
- More prepared team for execution: guaranteeing the team has the capabilities and tools to execute the planned changes effectively
- Higher progress tracking accuracy: objective measurement of project’s success against targets
- Longer term sustainable results generated: designing initiatives which improve ways of working and stick once the project is over
- Stronger culture of efficiency: embed a new way of thinking in the day-to-day of the business
How does it work?
Based on a practical and dynamic approach, our methodology ensures an implementation perspective and balances process diagnosis with deep numerical analyses
Our methodology is organized in four steps:
Guarantee that the necessary data is organized and that leadership is aligned on the efficiency targets.
- We bring our experience to support the company’s leadership in defining a clear efficiency target, considering the business’s context and strategy
- Based on preliminary interviews with the leadership team, we also define the numerical baseline ($ and/or # headcount), which is fundamental for calculating potential savings without distortions
- We also assist the leadership to communicate the target and reason why, to all stakeholders
2. SCREENING & SAVING HYPOTHESIS
Map hypotheses exhaustively, balancing broad diagnosis with deep analysis of sensitive processes.
- We count on our professionals from Integration’s different practices and competence centers. This is central to facilitating our technical understanding of your company’s reality through interviews, processes mapping, data analysis and internal and external benchmarking.
- This step is crucial for ensuring adherence to your business reality with an implementation mindset throughout the project, both critical factors for achieving the desired results.
- From our experience, the biggest trap in a cost-efficiency project is trying to map conceptual opportunities with theoretical benchmarks and analysis. Being conceptual generates a high risk of mapping infeasible opportunities that do not have buy-in from the team.
- We therefore conduct a comprehensive diagnosis, typically divided in two main workstreams: headcount and expenses. These involve all the necessary professionals and process-oriented benchmarks to generate a map of hypotheses and their associated benefits and risks.
- Involving all necessary professionals at this stage increases the team’s empathy with the project and is the first step towards building the sense of ownership that is vital for ensuring that the project continues to be driven after Integration has left. We take special care in fostering this ownership in your team.
- This phase ends with a “Go / No Go” workshop with C-level professionals in which, supported by Integration, the leader of each area presents the mapped opportunities to the project committee and recommends how to proceed.
3. FUTURE MODEL DETAILING
Detail the future state, based on the direction from the “Go / No Go” workshop, together with the client team.
- Detail what is required to implement each of the approved initiatives, including the design of the future organizational structure, model, processes and systems.
- Here we ensure a pragmatic approach, identifying quick-win opportunities that do not need to be further detailed so they can move directly to the implementation phase whilst other initiatives are detailed.
- We also recommend the participation of senior team members to discuss corporate culture, restrictions and past experiences so that these can be considered when designing the details of the future model.
4. SAVINGS CAPTURE ROADMAP
Consolidate the plans for each initiative and assess interdependencies, prioritizations and overall feasibility to ensure the planned results are achieved
- Relying on our implementation expertise, we build the implementation roadmap together with your team. The roadmap includes a logical and organized strategy for how to tackle each initiative encompassing all the necessary steps, context, risks, resource capabilities, enablers and investment
- In an analogue structure, we also calculate a financial roadmap that shows when savings and investments will occur in from a P&L and also cash flow perspective
- An important activity is the definition of a leader for each initiative. We guarantee their onboarding, enabling them to lead the implementation and drive the initiative forward in the future.
- We also design and implement a governance model to provide visibility to leadership and ensure that the initiative leaders have the support they need after Integration leaves the project. The implementation and financial roadmaps are used by senior management, initiative leaders and the PMO to keep track of the project’s evolution and benefits (from cost savings to ROI)
Our client, a Brazilian drugstore chain with more than 1,000 stores, had experienced a period of growth following a cycle of post-merger integrations, general professionalization, and geographic expansion. As a result, SG&A levels increased significantly above competitors’ levels and compromised the profitability of the organization. Within this context, the board decided to pursue efficiency measures at headquarter and store level.
By working together with the client’s team, we mapped more than 90 opportunities. After the Go / No Go workshop with the directors, in which we approved 90 opportunities, we worked with the managers leading the implementation to detail the 10 most complex opportunities, representing 50% of the forecasted benefits. Finally, before leaving the project, we ensured that the client’s team was able to own the initiatives that were still ongoing, which was key to the successful implementation of the project.
We mapped and validated $38m in savings, representing a 10% reduction from the SG&A baseline and $4.5m from the COGS baseline.
One of the top 3 food retailers in Brazil, with over 400 stores and multibillion USD turnover, was facing historically low EBITDA margins and implementing management changes as part of a turnaround effort. The client asked for Integration’s support in reviewing overhead costs and head count, focusing on the optimization of head office functions, shared services, and in-store support. The organization had set aggressive targets to improve cash flow as a pre-requisite for further changes in the operation.
We acted together with the new top management in understanding the roles of each area, their head count, costs and processes in order to identify transformational opportunities. The team mapped more than 120 initiatives, representing a saving of 30% of the total headcount base which we translated into a roadmap focused on approximately 10 quick wins that represented 50% of these savings.
Together with HR and the area managers, we implemented the headcount reduction, building a step by step plan for dismissals, internal and external communications, and office relocation, allowing the company to guarantee business continuity and monitor savings as they were captured.
The project was successfully implemented, providing a 30% headcount reduction. This was equal to a profitability increase of 3 percentage points.
A $10 bn multinational food company, with more than 45 plants and 100,000 employees, was expanding its operations and had strong profitable results until 2016 when some strategic and implementation errors were made. Experiencing a complex external context, in 2018 the company hired Integration to design a cost efficiency project across different areas (production lines, sales teams and head office functions), focused on headcount reduction and reviewing the employee remuneration structure.
Together with the client’s team we mapped cost reduction initiatives in various work fronts, ranging from plant productivity comparisons to shared service process discussions for the different countries and regions. Integration also participated in the detailed design and implementation of supply chain initiatives. All initiatives were validated with directors and the board whilst a comprehensive governance was designed to ensure the delivery of the implementation roadmap as planned.
The project delivered from headcount reduction, representing a 15% cost reduction vs. the baseline, as well as more than $11m savings per year from remuneration adjustments.
Aiming to reduce their G&A expenses by $11m per year, a major player in education with over $1b turnover hired Integration to help map potential savings in specific administrative areas that supported its business units whilst simultaneously improving the quality of the service level that these areas offered to the students.
Within this context, Integration worked closely with functional leaders to perform analysis on multiple efficiency levers such as productivity comparisons among business units, make or buy decisions for non-core services, process and structure redesigns (avoiding redundancies), automation and centralization. We also helped the company’s leadership to for a new central office because of the centralization proposed for some areas.
In the end, the project beat the savings target, bringing creative solutions with the client’s team fully committed to the initiatives.
OUR INDUSTRY EXPERIENCE
Integration has had the pleasure of providing efficiency and cost reduction support for many regional and international companies from the Retail, Food, Pharmaceutical & Healthcare, Footwear, Education, Media & Entertainment, Real Estate, Construction and other sectors. Our professionals therefore have an understanding of market dynamics, best practices and how to deal with many different contexts and motivations across various geographies and industry segments. This allows us to undertake robust and customized projects together with our clients, taking into consideration their specific situation and external factors.