Wednesday, August 27, 2008

Articles on Cost Reduction and Cutting by Consultants

Boston Consulting Group

June, 2008

A Principled Look at Cost Cutting

Many financial institutions have made progress in trimming overhead costs. But achieving truly meaningful reductions, with no “creep-back” over time, remains a challenge for most. BCG has developed an innovative cost-cutting method that involves establishing specific principles — rules that set limits and goals regarding organization and performance — through which head count reductions can be accomplished. Up to 20 percent of total FTE costs can be cut within six months using this method, which is known as Principles-Based Cost Reduction (PBCR).

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January, 2008

Banking on Lean Advantage

Years ago, pioneers in other industries—notably the automotive industry—began seeing operations as a strategic asset to be leveraged, rather than a source of costs to be managed. They looked at operations holistically, rather than through a one-dimensional, cost-oriented lens. BCG has been using a similar approach, lean advantage, to help banks complement efficiency improvements—cost reductions as high as 30 percent—with impressive gains in customer satisfaction and loyalty, all while building internal capabilities to ensure continuous improvement.

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Views of Accenture Consultant

“The industry does carry a lot of cost,” says Bob Gach, global managing director capital markets at Accenture in New York.

The concept of “sustainable cost reduction” takes a more holistic or systemic approach to cost reduction, according to Accenture’s spokesman. Instead of one department looking to reduce costs and another department working independently, all the departments work together as an enterprise to reduce costs. This makes the cost reduction more sustainable in the long run, says Accenture’s spokesman.

With this kind of approach, any large investment bank can take out $1 to $2 billion in costs, says Gach. “For the next tier down, the opportunity is $300 to $500 million,” says Gach.

What’s also inevitable is IT vendor consolidation, says Gach. With all the procurement deals on Wall Street, many firms are using dozens of vendors. Consolidating the number of relationships is part of the cost-reduction process, Gach suggests.

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