Duncan Williamson: Book Review Driving Down Cost: how to manage and cut costs intelligently wil.html

The great thing about travelling is that it drives one into corners that one might not otherwise have the time or opportunity to be driven into. In my case, I always head for the magazine rack and the book shop when I am between trains and planes.

Happily for me, in this case, as it is literally true that a client asked me to put together a course for senior financial and non financial managers on the subject of cost containment. Lo and behold I went into Border’s bookshop in Terminal 3 at Heathrow Airport and there was this book by Andrew Wileman. A welcome and timely addition to my bookshelf!

My first comment is that this book is neither the be all and end all of cost reduction or containment and neither is it the accountant’s version of the book. What I mean on both counts is that Andrew Wileman has written a management consultant’s guide to cost cutting: that’s not a bad thing at all. However, if you are looking for finely tuned arguments, worksheets and so on, you won’t find them.

In my case, it is a useful book because although I have been around management accounting for a couple of decades more and I have done turnaround consultancy jobs that include cost cutting, I am not a major practitioner in the area. I have learned a few things from this book.

Contents

The contents of this book are:

1 Good Cost Management
2 Cost Leadership
3 Techniques and Tactics
4 People
5 Suppliers
6 Cost Cutting Case Study: this is a four month exercise on cost cutting
7 Wired And Global
8 Lateral Thinking
9 Cost Management as Strategy
10 Cost In The Public Sector

I think that list provides a fair reflection of the work of the cost cutter.

PDA Summaries

Along the lines of my comment that this is a consultant’s book rather than that of an accountant, on page 8 there is what Wileman calls a PDA Size Summary: here it is and as you can see, each heading in the left hand column is a chapter heading and the heading in the right hand column is a subheading.

The Cost Manager's Toolkit: PDA Size Summary

LEADERSHIP	Challenging base case
	Individual accountability
	Persistence
	A continuous improvement culture
	Short timeframes
	Feedback loops
	Strategic scepticism
	Top team - Finance, HR
	Role models
TECHNIQUES AND TACTICS	Understanding cost dynamics
	Management accounts and metrics
	Bang for buck
	Slice and dice
	Understanding natural cost trends Cash cost v P&L cost
	Best practice
	Competitive analysis
PEOPLE	Hiring
	Paying
	Technology and productivity
	Firing
	Minimizing the core
SUPPLIERS	Playing the balance of power
	Fewer better suppliers
	Intelligent negotiation
	Avoiding lock-in
	Managing total cost of ownership
	Tough on services cost
	Reduce non labour overhead
WIRED AND GLOBAL	The internet - costs of interaction
	Globalization - the China card
	Globalization - the India card
LATERAL THINKING	Time is money
	Complexity is expensive
	Quality cuts cost
	Let customers do the work
	Turn cost into revenue
COST MANAGEMENT AS STRATEGY	Deliver value on acquisitions
COST MANAGEMENT AS STRATEGY	Underpin pricing strategies

Laptop Size Summaries

Along the same lines, let me skip to the end of the book to show you the Laptop Size Summary! Here you can see the second part of the laptop summary for leadership and the only table for Techniques and Tactics. What makes this a Laptop Summary as opposed to a PDS Summary: the laptop summary takes the sub headings and adds the sub sub heading or thekey idea behind the sub heading!

LEADERSHIP (cont)

Feedback loops	Make sure there is a process for seeing quickly and clearly what progress is being made on cost targets...
Feedback loops	...Involving good hard data, delivered quickly, reviewed frequently, with visibility and transparency
Strategic scepticism	Make your managers very nervous about proposals to invest in strategic partnerships or core competencies
Top team	Establish a strong CFO and finance function, the CEO's critical right hand for cost management
Top team	And a proactive, hard-nosed HR function, willing to take on the key issues of people cost and staff productivity
Role models	You and your top managers should be good role models in personal expense habits
Role models	Establish fairness or equality in expense policies and behaviour down through the organization
	Create a head office environment that sends the right cost message to suppliers and employees

Techniques and Tactics

Understanding cost dynamics	Understand what creates cost
	And what your key trends are (up and down)
	And how costs move in relation to decisions and activities, e.g. with revenue and headcount
Management accounts and metrics	Produce management accounts and metrics that let you understand, model and manage the true economics
Management accounts and metrics	Make the presentation crisp and accessible
Bang for buck	Focus on where to get the biggest results fastest
Slice and dice	Break out and chisel away at the difficult costs
Slice and dice	Unbundle activities and map them against customer segments
Understanding natural cost trends	Don't fool yourself you are pushing water downhill
Understanding natural cost trends	Don't expect to push water uphill
Cash cost not P&L cost	Particularly in a cash crunch
Best practice	Regularly look for best practice across the organization
Best practice	Take opportunities to do experiments and comparisons
Competitive analysis	Check competitors' cost positions and trend - have they found more cost-effective ways of working?
Competitive analysis	Distinguish structural cost differences from operational execution

Toolkits

Apart from lists what does the book offer the reader? Well, there are a lot of check lists but there are also a lot of tips, ideas and examples for us to chew on. Some things are blindingly obvious, so I won’t repeat them here. Some things may be obvious for you but not so obvious for me.
We can see some of these ideas in what Wileman calls his Toolkits: there are several toolkits throughout the book, here is just one of them:

Toolkit: Suppliers

UNDERSTAND AND PLAY THE BALANCE OF POWER, IN PARTICULAR WHERE THERE IS:

O High interdependence
O High buyer dependence

MOVE TO FEWER SUPPLIERS

O And make your selection from better ones.

NEGOTIATE INTELLIGENTLY

O Understand suppliers' economics
O Try to find win-wins
O Leave profit for the supplier
O Consolidate buying power
O Trade off price and terms.

DONT GET LOCKED IN

O Have one credible alternative
O Reduce switching cost
O Avoid long-term contracts
O Maintain an active marketplace

MANAGE TOTAL COST OF OWNERSHIP

O Not just up-front and obvious cost or capex, also ongoing and hidden costs
O Factoring in the benefits of trialing and future flexibility

GET TOUGH ON SERVICES COST

O Central procurement
O Professional services
O Outsourcing
O Travel

Summary

This is a useful book for anyone looking for a systematic and basic review of cost cutting but it is not the Bible of cost cutting. The style of writing is friendly and direct but I feel the need to warn the purist that even though Wileman is English (I think) the book is written in AmerEnglish. This comes through in the spellings and that awful version of syntax they call grammar in the USA, where nouns become verbs and prepositions are there to be abused. I don’t like this, by the way, if you allow me a personal view. I know that publishers can save a significant amount of money by publishing one version of a book rather than two; but why oh why should we suffer from all these dreadful Americanisms having paid almost £20 for the book? Of course, this is my bête noir and you might not agree at all: you might not even notice what I see as a problem!
Conclusion

In conclusion, I do like the book: it is written for consultants but I thinks as a useful series of reminders and checklists, it will serve accountants well too.

Reference

Andrew Wileman (2008)
Driving Down Cost: how to manage and cut costs intelligently
Nicholas Brealey Publishing