Economic survival guide: Cutting costs

As the cost of providing the workspace is a significant proportion of the total operating cost of any business, this is an area which must be subject to special scrutiny. For real estate, workplace and facilities professionals, the challenge is to take cost out quickly, whilst ensuring critical business functions continue to run smoothly and avoiding any poor decisions that may have high cost implications when the upturn eventually comes.

1 Immediately cut back on your discretionary expenditure – carefully
Service levels will have been set after careful consideration of the implications on business continuity and compliance – impulse reductions may have serious and unforeseen long-term repercussions.

2 Understand your portfolio
It is surprising how many businesses still do not have full visibility of how many properties they have, how they are being used and what lease liabilities and opportunities exist. Update your register of properties and leases. Do you have lease breaks pending that may enable you to renegotiate or exit the lease? If you need the space, don’t forget to consider moving to monthly rental payment to ease your company’s cash flow.

3 Maximise your portfolio usage
Some companies may have a current register of properties and leases but do not really understand how the buildings are utilised. Headcount reductions will present opportunities to optimise the utilisation of workspace. Undertake a quick space utilisation study – fast track with real-time workplace technologies. Reduce portfolio footprint fast – dropping properties and working smarter actually has more impact on reducing costs than simply cutting variable costs alone.

4 Challenge your work-style culture
A workstation will typically cost around £8,500 per year. Alternative working styles – desk-sharing, hot-desking and home working – could shed thousands of workstations and save millions of dollars. Consider repurposing the workspaces of employees who travel extensively; fundamentally review your allocation of space.

5 Challenge service levels
These will have been set in better economic times, based on assumptions of what was important then in each building – brand identity, customer experience, employee experience, business continuity or compliance. This will have changed. Customer experience will probably have grown in importance as retention of customers becomes critical.

6 Eliminate duplication in service delivery
It is a useful exercise to map all the resources – both in-house and with suppliers – involved in service delivery. The more suppliers you have, the more interfaces there are and the more resource that goes into managing the interfaces. Different suppliers have different processes and different cultures which need to be aligned.

7 Outsource what is non-core
This is another area where past decisions – on what is core and non-core – may no longer be valid.

8 Challenge the outsourcing process
The outsourcing process can typically extend over twelve to eighteen months and use up large quantities of internal or costly consulting resources. Choose a reputable supplier with a good track record and negotiate a contract which can start to deliver benefits in a few weeks.

9 Be the best at sourcing
Consolidate your supplier base, leverage procurement across borders, and with lower commodity prices start with contracts which have a high volume of materials and a regular turn-over of parts. Make sure that you are not putting your business at risk by depending on suppliers that do not have a sound balance sheet.

10 Don’t forget your carbon footprint
The current consensus is that the planet has about twenty years to significantly cut back on greenhouse gas emissions before global warming will cause new natural mechanisms to kick in and accelerate climate change. Legislation and regulation in this area will inevitably increase over the next decade.

Guy Holden
Visit johnsoncontrols.com or Write: Johnson Controls, Building Efficiency, Tower 1 Royal Pavilion, Aldershot, GU11 1PZ, UK