Poor overhead management can turn best-in-class operational performance into a bottom-line loss.
At PIP, we take some basic process steps for overhead cost reduction:
- Establish the fact base and generate hypotheses
- Identify the opportunities and plan implementation. Typical levers include:
- The reduction of layers and an increase in the span of control
- The removal of low-value work and duplication
- A reduction in the complexity of work
- The reduction of full-time equivalents (FTE) and other related costs
- The implementation and lock in of the improvements.
The results of some of our recent overhead cost-reduction work are:
- A large Australian gold miner. Developed the detailed organisational chart (with 10% fewer FTEs) from a high-level centre-led strategy. Key improvements were implementing best practice spans of control and new centralised processes.
- A large African petrochemical business. PIP conducted a post-implementation review of a programme to centralise/optimise overhead functions such as finance, supply chain, HR and safety. Through interviews, surveys and a detailed analysis, PIP identified a number of opportunities for optimisation, as well as a detailed action plan, to realise these opportunities.
- A large iron-ore miner. Developed a detailed Operating Model and Organisational Design spanning 6,000 FTEs. The focus was to centralise components of asset management near the head office thus reducing FTE requirements at high-cost remote locations.
- A large Australian gold miner. After mandating a 30% reduction in general and administrative (G&A) costs the client’s executive team asked PIP to review current levels of performance and productivity, and identify the areas where costs could be reduced by removing duplicated work. This would eliminate non-value adding activities and the automating process. The benefits work delivered an improvement pipeline worth AU$24m.
- A large global mining house. PIP reviewed a recently implemented organisational structure, Key Performance Indicators (KPIs) and accountabilities. We also developed tighter-role clarity work and installed regular Results-Action-Reviews (RARs) to make it work. Led a major cost-reduction programme that saved $80m in the financial year and $140m on an annualised basis (with all benefits signed off).
The value derived from the PIP intervention is on record. However, more important to me is that the fundamentals of sustainability have been addressed, and I would like to thank the PIP team for a most satisfying and rewarding experience. Their value-add is evident both in our business and in our personal growth.GERALD BOTING