By Doug Hudgeon
The Cost Reduction Tip
Today’s tip is quote from a yet-to-be released report calling for dramatic cuts to the administrative overhead of the Canadian military. Today’s Globe and Mail has printed key parts of the 80 page report prepared by Lieutenant-General Andrew Leslie, Canadian Forces Chief of Transformation.
The printed excerpts could serve as a blueprint for any organisation undertaking a cost management initiative. The excerpts are striking in how concisely and entertainingly they articulate the key issues and key obstacles. Additionally, the impetus for undertaking these reforms is also succinctly set out: “Canadians deserve better”.
This phrase “__________ [insert stakeholder name here] deserve better” is an appropriate title for any corporate cost management initiative. We owe it to our shareholders, our staff, our suppliers and our customers to be as efficient and as effective as we can possibly be. But enough soapboxing. Onto the key issues and key obstacles as set out in Lt.-Gen. Leslie’s report:
Key cost management issues:
7,000 regular forces personnel and civil servants hold jobs that serve little purpose 4,500 full-time reservists are under-utilised and should be converted to part-time service Decrease by 30% spending on private sector consultants Consolidate overlapping departments
These changes would cut administrative overheads by more than CAD $1B per annum.
Key cost management obstacles: The key obstacles highlighted in the report are the same key obstacles faced by every organisation undertaking such an initiative: entrenched bureaucracy protective of the status quo and lack of leadership. One of my favourite quotes from the article is the General’s comment on the internal resistance his team met whilst conducting their enquiries: “The tendency was to argue for the preservation of the status quo” noting that some internal consultations could be best described as “grimly amusing”. From my time advising on defence force contracts, I can appreciate the challenges in front of Lt-Gen. Leslie. All the best, General!
Other favourite quotes from the article:
Reactions to previous reports urging reform
“If the results were likely to cause institutional angst, a variety of options existed, from waiting until the team disappeared, to conducting lengthy reviews of the recommendations and, finally to classifying the work to an extent that only a few could see it.”
On resistance to this report
“[At] a large meeting in December 2010 involving the generals, admirals and senior DND civil servants … it became apparent the tendency was to argue for the preservation of the status quo. … Though grimly amusing, these interactions proved that consensus has not and probably never will be achieved on any significant change.”
How DND handles funding cuts
“Most subordinate organizations have done their very best to preserve their structures, their internal funding (what they need to take care of themselves) and their process … which usually result in overhead staying much the same while support to the front-line deployable unit is cut far more than originally forecasted.”
On waste and inefficiency
“These are symptomatic of old processes, new overhead layered on old, lots of committees and in certain areas a sometimes bewildering number of steps …to actually achieve a government directed spending outcome.”
Cause of increasing trend to not spend allotted money
“The issues of stifling process, blurred authorities and accountabilities, as well as some reluctance at all levels to accept managerial risk … go a long way in explaining a disturbing and increasing trend as to why many hundreds of millions of dollars have remained unspent, starting in fiscal year 2006/07 and growing to this day.”
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.