Cost Optimization Through Organizational Effectiveness


Tuesday, March 23, 2021 / 1:30 PM / By Tayo Afolabi, Senior Analyst and Joshua Ademuwagun, Managing Consultant, Phillips Consulting / Header Image Credit: WinningGO


It is not a myth; organisational effectiveness can be a reality. While it refers to how well a company is meeting its set goals and objectives, it also describes a company that produces desired results with minimum use of time, money, and human and material resources. Effectiveness also refers to optimising your cost. The COVID-19 pandemic has hit our world hard and is determining how organisations choose to travel over the next few weeks. Business leaders must consider ways they can optimise their costs for their companies to survive. The new mantra for most businesses is now "survival first". This has made the conversation about organisational effectiveness more sacrosanct. After over twenty-seven (27) years of working with organisations across different industries to define the key ingredients needed to execute organisational effectiveness assignments smartly, we have identified four (4) key elements that should not be ignored. We call them the 4P's of organisational effectiveness:


In a circularly causal way, these four (4) elements work together to produce great effects for an organisation.


1. Purpose

Organisations that operate effectively are clear about why they exist. As a matter of fact, they place their reason for existence above what and how they do what they do. The first principle in the school of effectiveness is the knowledge and understanding of purpose.

  • How well-crafted is the vision and mission statement of your organisation?
  • How real are your core values in describing your organisation's current culture?
  • Can your employees connect to it?


These are very important questions to answer. When the purpose is clearly defined, it helps a business focus on the main services and either truncate or at best outsource the non-essentials. The conversation of purpose makes organisations strategic in the way they approach their business and plays a vital role in optimising cost. Such organisations tend to spend on the things that really matter.


2. People

Smart companies recognise and prioritise their people as their greatest advantage. The long-term growth of a company depends on the quality and loyalty of its employees. In the world where strategy and culture are king, it is people who embody and implement both. Today's leaders are beginning to understand that the same attention given to the external customers of an organisation, must be given to its internal customers (employees). Some have even argued more attention is to be given to the internal customers than the external. The proponents of this view opine that the internal customers (employees) represent the brand and have the power to project a positive or negative impression to external customers or potential customers. According to Simon Sinek, a renowned writer and thought leader in the area of leadership, "Customers will never love a company until the employees love it first".


3. Process

In the words of William Edwards Deming, the American engineer who is regarded as the father of Total Quality Management, 'If you can't describe what you are doing as a process, you don't know what you're doing'. A company's process can be business and operational-based. While business processes guide an organisation in profitability and cost management, operational processes involve all inputs and outputs that result in a final organisational output (i.e. product or service). Process ties the business goals, steps, and stakeholders together in a triangle. The purpose of establishing processes is to ensure the consistency of results or outputs. As part of the post COVID-19 conversation, organisations must re-examine their processes and ensure they are nimble and fit-for-purpose to deliver the desired strategy and results needed.


4. Performance

If employee performance is not at its optimum level, then organisational effectiveness is not in sight. Employers are to ensure they hire the right talent and invest in ensuring their performance is at its peak. A critical part of cost optimisation is investing in initiatives and elements that can improve employee and business performance. Asides from creating the right kind of environment and providing the necessary resources for employees to perform better, employers are to ensure they invest in relevant talent development initiatives such as coaching, training, eLearning initiatives, mentoring, and the likes to ramp up employee performance. The decision to reduce the training budget might not necessarily be the right one. If training will infuse the needed critical skill into your workforce to perform better, then it would be optimising cost to spend on relevant trainings. Cost optimisation is not always cost reduction. The very concept of optimisation suggests the intelligent use of resources to deliver the required result.


The right strategic alignment between purpose, people, process, and performance will always have a positive effect on an organisation's effectiveness. This in turn determines how well an organisation can compete in the marketplace.


Peter Drucker, the late Austrian-born American management czar, said it right: "Efficiency is doing things right; effectiveness is doing the right things." To optimise cost at such critical times is to deepen organisation effectiveness.


Credit: The post Cost Optimization Through Organizational Effectiveness first appeared in Phillips Consulting Blog on June 10, 2020.



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