It should come as no surprise that almost all public sector leaders today anticipate increased cost pressures to get their jobs done. In a recent survey of these leaders by CEB (now Gartner) 85 percent believe their workload will increase in the future, but only 20 percent think their resources will keep pace. Agencies have long sought to cut costs and improve efficiency, pushing the mantra “do more with less.” But the reality is that teams are hitting their limits.
Leaders often focus on squeezing just a little bit more out of their team’s performance to maintain the same level of service at a lower cost. This may seem logical, but it is not sufficient to sustain the level of cost cutting federal leaders currently face.
A major mistake many take when implementing cost-reduction campaigns is to assume that all of a function’s activities are created equal and each delivers the same worth for the same cost to the organization. Instead, leaders need to think critically about what their teams should and should not do. With the private sector companies we work with, we’ve found that those that implement sustainable cuts to service delivery costs focus on the total value of the services—prioritizing resource investments where the value is the greatest, and cutting back on those where it is low.
To realize true cost savings, federal leaders should focus on three critical steps for sustainable cuts and investments:
- Define the value proposition of your function. When prioritizing services during a cost-cutting exercise, many leaders protect the activities that their function does well. However, when leaders are pressed to make resource tradeoffs, the things their function does well may not be the things that are the most important. To define the value proposition of the function, leaders need to first understand the return of different services through the lens of the customer. Since not all services are equally appreciated by customers, leaders need to identify the activities that the function must do to deliver the greatest value. From there, leaders can pair the things that their customers need the most with the activities required by legislation or regulation to define the function’s value proposition.
- Determine the costs of products and services provided to customers. Functions are often classified as a series of activities or things the team is required to do to meet performance expectations. The challenge with this definition is that activities are often not tied to the time, resources and cost to deliver the activity, making it difficult to evaluate the investment required. Instead, leaders should look to organize activities into a portfolio of services and products and include the cost each one has to the organization. One way to do this is to consider what a statement of work would look like if a certain activity was outsourced and estimate the cost and time associated to deliver it—this is the total investment required.
- Make principled cuts to the portfolio of products and services offered. When there are not enough resources to deliver all of the function’s services, leaders must make decisions on what to invest or underinvest in and what can be stripped out. By making investments based on the value of the service, leaders can avoid a one-size-fits-all approach to cost cutting, continuing to do the things that are most important and deprioritizing the things that are not. This, in turn, will enable leaders to sustain cost cuts while funding services and products that are most important.
There is no doubt that leaders across the federal sector will face tough decisions in this environment of “more with less.” To drive sustainable cost cuts, leaders need to shift their approach from driving efficiencies across all activities and instead make investments and cuts to resource the areas that are most valuable to the organization.
Liz Joyce is an executive advisor at CEB, now Gartner.