Cutting G&A costs in service businesses

21. April 2009 by Aidan.

David Mountain and Hernan Saenz have written a good article on Streamlining Support Services for Cost Reduction.  

When cost reduction is an urgent requirement, companies usually start looking at their G&A (General and Administrative) expenses before touching front line staff. If you have to reduce G&A expenses then you need to do so in a way that will have minimal or no impact on the service level that you provide to customers.

A typical approach to this is the slash and burn approach. It is quick but often you will find that over time many of the positions that were slashed and burned creep back into the organisation.

Your twin goals should be to maintain customer service levels and improve efficiency and productivity of support functions.

The first step is to look at your organisation chart in a new way. Typically your customer facing resources appear at the base of the org chart, with higher management levels above. By inverting this structure you place the most important customer facing employees at the top of the pyramid and all other support functions below. “Inverting the Pyramid”.

This allows you to examine the role and contribution of each support function in enabling your service delivery personnel to do their jobs. It helps executives determine which support functions are essential to the front line. It will also help decide where you can reduce some support functions and where to redesign other support processes while ensuring that you maintain the high levels of service excellence that your customers expect.

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