Culture shock - unlocking the barriers to sustainable cost reduction

As the reality of the UK Comprehensive Spending Review starts to impact government departments and delivery bodies, PA Consulting argue that transformational change will only be achieved when the cultural barriers are broken down.

Across government there is growing realisation that only a transformational approach to cost reduction will meet the challenges arising from the public sector deficit. Traditional budget ‘top slicing’ will not be adequate because it is imperative that any savings must be sustained in the long-term and disruptions to service delivery minimised. Collaboration between organisations - within and across sectors, strict prioritisation of activity, shared services, outsourcing and radical re-design of operating models are the type of comprehensive solutions that are being widely acknowledged as necessary and are being actively considered.  

Many of these solutions are not new and have been tried in recent years, but often with mixed results - as has been well-documented in post-implementation reviews and National Audit Office (NAO) audits. The desired benefits have not materialised, and implementation has taken longer or been more complex than anticipated. So, given the importance of getting it right this time and the scale of change being planned, what needs to be done differently to ensure success?   

In our experience, one of the key barriers to success has been an over-reliance on structural and process change and not enough emphasis on tackling the behavioural and cultural changes that are needed to ensure benefits are realised. Organisations need to build a change programme that explicitly considers culture and deals with the embedded attitudes so that the right behaviours are created.  

There are three components worth highlighting in particular:

Lead from the front

The changes required will not be comfortable for organisations. Brave leadership to question supposedly untouchable budget areas will have rewards both in saving money but also in the powerful message it communicates. At our clients we have found that leaders who are visible, are demonstrably willing to take decisions and are committed to working across organisational boundaries will take their team with them. Clarity that difficult decisions are unavoidable needs to be communicated and repeated.  

Instil a cost-conscious culture

Systems, structures and processes need to drive and reward a cost-conscious mind set. However, it is about far more than showing that every pound spent is important. In our experience of working within public sector organisations clients with a true - and successful cost-conscious approach aggressively match resources to priorities and performance manage proactively and assertively. There is widespread awareness of cost and financial implications of all activities and a focus on continuously identifying and removing waste.  

Prioritise investment in specific areas of capability

It is tempting to cut down on all areas of discretionary spend when faced with budget constraints. However, our clients who have most successfully reduced their cost base, in both the public and private sector, have focused on the skills required to save money in the medium and longer term. Commercial and contract management will be required to deliver maximum value from suppliers, benefits realisation capability can ensure good ideas are translated into delivered savings, medium-term financial planning will make sure efficiencies are delivered when and where necessary, and intelligent management information will be key to ensuring organisations continue to deliver in challenging times. 

A feature of the public sector landscape is value for money initiatives and efficiency programmes. Failure is not an option - the cultural barriers to realising the benefits that have been seemingly insurmountable in the past must now be overcome.  

To speak to a consultant about how we can help your organisation achieve transformational culture change, please contact us now.