Change Management in a Cost Takeout Environment

Everyone has been through “Cost Savings Programs” and “Cost Reduction Programs”, but what is the organizational impact of a true Cost Takeout process and what does change management have to do with it?

Key objectives for cost takeout programs are dependent on their time frame and may include:

1. Total restructuring
2. Business transformation: a totally different way of doing business
3. Remove 40% of the costs and still produce at the same quality and quantity

These activities change everything Successful companies make this change BEFORE it is required. They see the change as a business imperative – they will cease to exist if they don’t make this level of change. Understanding Cost Takeout and its implementation requires careful planning.

Now that we have your attention, what does a change agent do to ensure success during the tumultuous level of upheaval a cost takeout initiative creates?  Create the Plan, Execute the Plan and Communicate, Communicate, Communicate.  Nothing new there, but very few organizations see the need for the change in time and therefore are always trying to catch up.  The following roadmap follows Group50’s Business Hierarchy of Needs® change management framework and outlines steps an organization MUST follow to safely exit the change.

Strategic Planning Session:

• Ensure you follow the entire process: Business Needs, Data Assessment, Create Strategies, Gap Analysis, Culture Check, Strategic Execution. Group50’s Strategic Planning process is a simple yet thorough way to work through Strategic Planning
• Develop a full assessment (SWOT, PEST, SOAR, etc.) to give you a much better understanding of your path forward

At the completion of the Strategic Planning process, you will have many of the key steps in the process completed or at least outlined:

• • New Direction, Focus and Leadership
  • New Objectives and deliverables
  • New Financial models and measures
  • A change management plan

Organization Re-Structure:

• As you plan for the changes required by a cost takeout initiative, you will note that new organizational structure, roles and responsibilities will require organizational design and development.
• Business Process Re-engineering from “Order to Cash” will define the future state and the organizational development needs.

If you are really going to change the way your business operates, one of the best ways to kick start this change is to assign new reporting lines. “A new broom sweeps clean” doesn’t always mean terminations, but should include re-assignments.

Change Management Tools:

• There are multiple Change Management models; Bridges, Kotter, Lewin, etc. Some work better for different organizations, so find a process that works for you and be proactive. As stated earlier, we use Group50’s Business Hierarchy of Needs® for our model
• During change, an organization can never communicate enough. Develop a communications strategy and stick to it

At the end of this change, your organization will have a different culture. It is in your organization’s best interest to plan for this change.  The combination of “Strategy and Culture Delivers Exceptional Results.”

New Tools:

• Now that you have a clear Strategy, a redesigned structure and have worked through the change management requirements, you need to deliver the tools to enable the organization to be successful. Group50® has a series of workshops that are designed to transfer knowledge and skills to your employees.
• Of course, new training and development will become self-evident for the “New way of doing business”
  • You will need to empower the Leadership and managers of others as well as provide the detailed new task training,
  • This is an ideal time to introduce new Lean Business Tools, and
  • What about your Digital/IT/Infrastructure changes?

Each of these taken singularly and in a calm state are tremendous undertakings, but doing all of them in the chaotic state of a Cost Takeout becomes a herculean effort.  You are in effect “Transforming your company” which is much more difficult than starting up a new company.  We will cover each of the above topics in future blogs so please subscribe to future blogs below.

About the author: Bruce Dougan is the head of Group50’s Organization Design and Development Practice.  Bruce and the Group50 team are all former executives with well-known manufacturing and distribution companies who understand what it takes to design, train, develop and motivate organizations to successfully implement a company’s strategic plan.  Group50 has designed a series of strategic assessments, workshops and strategic execution tools that optimize your organization.  You can reach us at (909) 949-9083 or send a note to info@group50.com. 

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