Collinson Grant

Attacking overheads

What we do

Businesses often see overheads rise as a proportion of total costs. Or rather, they don’t see them! Because functions are managed separately, the trend can be hard to spot. When companies have operations in several different countries it becomes even harder to contrast and compare relative costs.

Process Activity Analysis - is a systematic survey of the effort spent on processes, activities and tasks. It pinpoints duplication, redundant tasks, and opportunities to cut costs
What are the main sources of sales and profit?
Appraisal of work content – evaluates accurately the work to be done in a set period. Work is broken down into discrete tasks and measured by the number of transactions and their duration
Activity Based Costing – allocates overhead costs to their true causes. It shows how the full cost is built up. So it highlights unprofitable products and services. ABC improves decision-making
Comparative Analysis – reveals different productivities and working practices in units doing similar tasks. External benchmarking can also provide a guideline.

How we do it

Process Activity Analysis is a systematic way of investigating the structure of costs in a business. It is based on people. It uses sophisticated sampling to collect data on:

what employees actually do
the proportion of time spent on different activities, and
how these tasks contribute to the main processes of the organisation

This helps clients to produce multifaceted pictures of the organisation. It gives managers a lot more information about actual costs than they are used to. PAA creates opportunities to reduce overhead costs by up to 20%. It shows where too much time is allocated to trivial activities, too many tasks are duplicated in different departments, and too much effort is spent on managing or supervising.

Implementation is based on sound data

PAA works well because the ideas it generates are based on data that line managers have helped to prepare and analyse. From these, detailed plans are developed. They result in big one-off and annualised savings. The firm is able :

to reallocate work
to eliminate redundant activities
to redesign processes and tasks
to change the organisational structure
to reduce waste and rework
to raise productivity
to cut costs.

Our experience

Process Activity Analysis is particularly useful in helping large, multifunctional organisations to review how much is being spent on overheads and what the real potential for savings might be. We have used this approach in Canada, Germany, France and the United States as well as on many occasions in the UK to help clients tackle the perennial problem of difficult to control indirect costs. It can be used to complete a thorough analysis of every cost item, or adapted to offer a snapshot of the opportunities for early savings. Bureaucracies – in the public or private sector – often yield the biggest savings.