A 90-day plan to reduce operational costs

Key takeaways

An operational cost reduction plan works when it is short, focused on a few processes and measured from a baseline. This one runs for 90 days in three phases: measure in days 1 to 30, simplify in days 31 to 60, and relocate and prove in days 61 to 90. It needs about 2 to 4 hours a week from one named owner.

• 90 days in 3 phases: measure, simplify, relocate and prove.
• Work on 3 processes, not the whole business.
• 2 to 4 hours a week from one named owner.
• Report cost per task, errors and turnaround at day 90.

What is an operational cost reduction plan?

An operational cost reduction plan is a time-bound programme that identifies where running costs can be lowered, sets targets, assigns owners and tracks results. A good one names specific processes and specific changes. A weak one names a percentage and hopes.

• How BPO can help businesses reduce operational costs
• Cost cutting vs cost optimisation: which protects profit?

Days 1 to 30: what do you measure?

In the first 30 days, measure where routine time goes and choose three processes. Do not change anything yet. The output of this phase is a baseline cost per task for each chosen process and a score on the five cost levers.

• Week 1: list routine processes and brief the team.
• Weeks 2 and 3: log time, volume and corrections.
• Week 4: price each process and score it on the five levers.
• End of month: pick the three highest-scoring processes.

• Run a time audit to find what to outsource
• Cost baseline: measure today's cost before you change it
• The cost lever scorecard: find savings process by process

Days 31 to 60: what do you simplify?

In the second 30 days, simplify the three processes before deciding who should run them. Map each one, remove steps nobody needs, and write down the method that remains. Many firms bank a meaningful saving in this phase alone.

• Map each process and time the waits.
• Delete unused reports, duplicate entry and needless approvals.
• Write a one-page standard method for each.
• Fix the top cause of errors or avoidable contact.
• Set a target cost per task with quality conditions.

• Value stream mapping for service and admin processes
• Process standardisation: one best way, lower cost per task
• How to set cost reduction targets your team can hit

Days 61 to 90: what do you relocate and prove?

In the final 30 days, move one simplified process to the most economical reliable way of running it, and measure. That may be a tool, a different person in-house or a managed team. Run a pilot on one process, not all three, with a weekly scorecard.

• Choose the delivery route for the first process.
• Agree scope, access and service levels in writing.
• Run the pilot with a weekly review.
• Measure cost per task, errors and turnaround.
• Report against the baseline at day 90.

• Run an outsourcing pilot before you commit
• Cost reduction KPIs: the numbers that prove savings are real
• The weekly operations review that keeps a lean team on track

What might the result look like?

Take an illustrative firm that selects invoicing, customer email and order admin, together costing £58,000 a year. Simplification in phase two removes 12% of the hours, worth about £7,000. Moving invoicing, which then costs about £10,000 a year, to a managed team in phase three lowers its cost per task by 40%.

By day 90 the run-rate saving is about £11,000 a year, with two processes still to move. If they follow in the next quarter with similar results, the annual figure approaches £25,000. These are example figures, not a forecast.

• Run-rate savings vs one-off savings: count them correctly
• How much can a small business save by outsourcing?

Who should own the plan?

One person should own the plan, with the authority to change how work is done and 2 to 4 hours a week to give it. In a small business that is usually the owner or operations lead. The team does the logging and suggests the fixes. Without a single owner, the plan stalls after the measurement phase.

• Cost cutting and staff morale: how to keep your team on side
• A simple BPO governance model

What can go wrong?

Three things commonly go wrong: trying to change too many processes at once, skipping the baseline, and handing over a process before simplifying it. A fourth is treating day 90 as the end. It is the first review. The savings that last come from repeating the cycle on the next three processes.

• Cost-cutting mistakes that end up costing a business more
• Continuous improvement in outsourcing: savings past year one

What does this look like in practice?

A pattern we see in firms that complete the cycle: the largest surprise comes in the first month, when the time log shows where hours really go. The largest saving often comes in the second, from deleting work. The third month, where a provider comes in, is the easiest, because the process is finally clear enough to hand to anyone.

Across our client work, back-office cost per task has fallen by 42% once the process was written down and run by a managed team.

• See client work
• BPO Solutions for UK businesses

90-day plan checklist

Confirm each milestone as you reach it.

• Day 7: process list agreed and team briefed.
• Day 21: two weeks of time and volume logged.
• Day 30: three processes chosen with baselines.
• Day 45: processes mapped and waste removed.
• Day 60: standard methods written and targets set.
• Day 75: pilot running with a weekly scorecard.
• Day 90: results reported and next three processes chosen.

• Operational cost reduction checklist: 20 checks
• What to do with cost savings: reinvest, keep or pass on?

Next step

Tell us your team size and the routine work that takes the most time. In a 30-minute call we will help you choose the three processes to start with and set up the first month's measurement.