Transcript Structured cost reduction

Structured cost reduction
Structured cost reduction
Overview of this presentation
• Spending Review 2010
• The NAO’s response to the spending
review
• Principles of cost reduction
• Lessons from previous NAO work
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Spending Review 2010
• Most Departments have significantly
reduced budgets
• It’s no longer enough to identify ‘efficiency
savings’
• Departments must be clear on their
priorities
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Spending Review 2010: Departments’
contribution to budget reductions (DEL)
Contribution and Scale of Challenge
80.0%
60% of overall cuts
70.0%
Real Cut as %age of Dept Total DEL
CLG - Communities
(£6.1bn)
60.0%
50.0%
20% of overall cuts
40.0%
DEFRA
Business, Innovation
Skills (£5.3bn)
Justice
(£0.9bn)
30.0%
CLG - Local Government
(£7.6bn)
(£2.3bn)
Home Office
(£2.5bn)
20.0%
Education
Scotland
(£6.3bn)
(£3bn)
10.0%
0.0%
0%
2%
4%
6%
8%
10%
12%
Contribution to Overall Real Cuts Total DEL (%)
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14%
16%
18%
20%
The challenge
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The NAO’s response
• Independent auditors, not consultants
• Financial audit: focus on internal controls
• VFM:
• examining examples of past cost reduction to draw
out good practice
• rolling programme of studies over the spending
review period
• principles of good practice
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Stages of cost reduction
Sustainability
Sustainable cost
reduction
Strategic operational
realignment
Tactical efficiency
savings
Quick wins
Prioritisation,
localised cost
savings/process
improvement/
performance
improvement
Cost:value
ratio – better
utilisation/
optimisation
of people,
processes,
technology,
procurement,
capital assets
Change
customer
expectations/
consider
alternative
delivery
models/shift
customer
channels
Implementation time/cost
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Structured
cost reduction
programme/
transformational
change
programme
Ongoing
embedded
cost
management
and
continuous
improvement
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Lessons learned from previous NAO
work on cost reduction
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Overall organisational approach
Risk management
Transition periods
Run-rate costings
Claimed savings must be backed up by
financial data
• Baselines
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Questions?
[email protected]
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Over to you…
• Good examples of
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Rethinking delivery models
Robust costing data
Whole organisation approaches
Anything else you think we should know about
• What are the major challenges you’re facing?
• In the next 3-6 months?
• In the next 6-18 months?
• Over the spending review?
• What would you like from NAO?
Structured cost reduction