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Cost management is the number one priority for many business leaders, but only 48% of companies managed to meet cost saving targets in 2024.
The reality is, even with a solid cost reduction strategy, it's impossible to eliminate waste alone. To achieve success, you need to invest everyone across your organisation in change.
But why should employees care about cost control? How does reducing waste improve their work lives?
Leaders know that with efficiency improvements come streamlined workflows, time savings and better work environments, but this isn’t always obvious to employees. To fix this, below you’ll find our complete guide to mastering business cost efficiency for sustainable change.
Business cost efficiency concerns the actions companies take to achieve goals while limiting resource waste.
Essentially, it's all about understanding how your ongoing processes work and the resources they require so you can find new ways to streamline operations, boost productivity and reduce costs.
To maximise cost efficiency, you must first work out how to produce products and services to desired standards using the fewest practical and financial resources. Then, you’ll need to work alongside your employees to adjust operations with waste and cost reduction in mind.
To become cost efficient, everyone in your business needs to view cost saving as a priority.
The benefits of maintaining cost efficiency must align with employee needs; factoring ways to make work more enjoyable for people into cost reduction plans to highlight real benefits.
If people think efficiency-boosting changes are only meant to reduce expenses, employees will likely feel some resistance. However, if they help to improve work conditions, people will feel more motivated to make them happen.
This is why employee ideas play a crucial role in improving cost efficiency. If you’re struggling to engage teams in change, tools like Sideways 6 help to break down barriers.
When you give the people who perform tasks every day the freedom to suggest time and cost saving ideas, you gain more knowledge and employees feel more motivated to change.
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Guided by Sideways 6-powered idea management tools:
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Cost efficiency is often confused with cost effectiveness; another effective way to measure operational costs and identify ways to save money. While the two measures are similar, they have different priorities:
Ideally, an organisation will be both cost efficient and cost effective, as sustainable business growth is reliant on reducing unnecessary expenses while maintaining service quality.
A good way to look at it is this: Do the right things and you'll become cost effective, do things the right way and you'll become cost efficient, do both and you can reduce costs while sustaining business value.
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Maintaining cost efficiency is a key driver of sustainable business growth.
As efficiency improvements benefit all aspects of business operations, prioritising cost saving measures can help you do more with less, exposing new opportunities to boost profitability and create better work environments.
The goal of cost efficiency is to maintain quality while reducing operational costs, typically resulting in better profit margins and more sustainable growth.
As an extra benefit, less time is wasted when tasks are performed optimally, freeing employees to think about further cost saving ideas and optimisations.
The fewer resources required to perform a task, the more flexible your business can be.
Improving cost efficiency is a risk management strategy, affording more room to adjust prices, navigate economic issues and invest in new technologies to spur sustainable growth.
Cost efficient processes use fewer resources and produce less waste, meaning as you streamline operations you also reduce your environmental impact.
As discussed in our recent article 'Transformations shaping the future of retail', 60% of consumers are willing to pay more for products they deem to be eco-friendly.
Cost control measures help businesses maintain a reliable cash flow, making it easier to meet financial obligations and target investment opportunities.
Significant cost savings gained through cost efficiency optimisations can be reinvested into business growth, helping to ensure good financial health.
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To properly implement cost control measures, and avoid joining the 50% of businesses that pursue cost reduction measures but fail to hit targets, you must follow a few key principles.
As with any other big change, engagement is the key to making cost reduction efforts stick, with McKinsey finding transformations that engage at least 7% of employees are twice as likely to succeed.
To improve engagement, everyone involved in a change must know its purpose, what it asks of them, how it benefits them and how the initiative's long term success will be measured.
Effective cost reduction strategies set clear goals for employees to work towards. This includes objectives that define long term success, as well as day-to-day targets people should work towards to lower costs.
Leaders must conduct a thorough analysis of a company's financial health and cost structures to gain a comprehensive understanding of operational expenditures, and to help identify cost saving opportunities.
Open, transparent communication is a key component of effective cost control. Collaborators across all areas must understand business objectives to make informed decisions about cost reduction strategies.
In today's competitive business landscape, maintaining cost efficiency must be viewed as a continuous process. All employees should look to spot inefficiencies and develop mitigation strategies at all times.
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To achieve sustainable business growth, all collaborators must feel empowered to eliminate avoidable expenses and streamline tasks to help their businesses run at optimal efficiency.
It’s like maintaining a road network. Every seemingly-small access road and intersection must be looked after to stop small faults becoming bigger issues. Cost control is your maintenance crew, proactively spotting and fixing problems to keep things running smoothly.
Here are 4 ways to boost cost efficiency and support sustainable change in your business.
Good financial management in the modern world is all about acting on high-quality data.
To make informed decisions about cost control measures, leaders must have access to timely financial data and quality internal insights. Only then can effective cost reduction strategies be reliably identified.
A cost-benefit analysis is an element of strategic planning that can help leaders identify the most cost-efficient way to perform a task.
In practice, teams will use advanced analytics to weigh up the potential benefits of a change against the actual costs of the new process to determine the entire project’s real value.
To conduct a thorough cost-benefit analysis, teams must:
Operational efficiency and cost efficiency go hand-in-hand. In basic terms, the objective of improving operational efficiency is to fine-tune processes to generate the most value using the fewest resources.
When you incentivise employees to find the most efficient way to perform tasks across all aspects of their work, you empower people to think about cost saving strategies all the time.
To reach this point, everybody must see a personal benefit in changed processes. So, it’s important to work frontline insights and ideas into all of your cost saving measures.
Using a tool like Sideways 6, leaders can give employees the freedom to share ideas in software solutions like Microsoft Teams that they already use daily. This can help to increase adoption and engagement in change initiatives to drive real, sustainable business growth.
While 1/3 of executives cite cost reduction as a critical focus at present, your people may have different priorities.
If you’re struggling to engage people in change, you might feel some frustration in terms of encouraging employees to think about efficiency improvement during everyday work.
Failing to address this can be a real missed opportunity, as often it’s those who perform tasks everyday who are best-positioned to improve them. In episode one of our Idea Exchange webinar, 'How employees' ideas drive successful change', Will Read, CEO of Sideways 6, puts it this way:
"There are an ocean of people out there in your organisation who want to be heard [and] listened to . . . if you find a way to harness this insight, excitement and potential you can make amazing things happen".
Using a tool like Sideways 6, employees can share ideas about time and resource-saving improvements that also stand to enhance profitability. By working these ideas into cost reduction strategies, you can attach real, desirable employee benefits to transformations to help promote sustainable business growth.
To master business cost efficiency, everyone across your organisation needs to adopt a mindset of continuous improvement.
Key factors contributing to high costs will change as markets shift and new technological advancements transform your industry, making effective cost control an ongoing process.
The most reliable way to identify inefficiencies and get ahead of future expenses is to widen the scope of your financial management efforts. The more people you can invest in and motivate to adopt cost saving measures, the easier it will be to navigate novel cost drivers.
To foster a culture of continuous improvement, you need to give employees reasons to think about how things could be done better. The same inefficiencies that frustrate your people also introduce avoidable costs, so hearing and acting on employee ideas can be a win-win.
Sideways 6 enables continuous improvement leaders to run employee-driven efficiency programs that create ownership of change from the bottom-up. When employees see their ideas for waste reduction being praised and enacted, they'll feel more invested in change and motivated to continuously improve.
Encourage cultural buy-in to cost saving measures by engaging employees in change. Sideways 6 gives your people freedom to share ideas for improvements inside the software solutions they use every day.
Help your employees feel the benefits of cost efficiency across all aspects of their work and create a culture of cost saving, driven by your people, enhanced by your leadership and prepared for the future.
Learn how Sideways 6 can help your business enhance agility and meet cost saving targets, try our product with a free demo today.
