What has to change in the organisation for a saving to hold

The gap sits between departments, not within them

An analysis by Bain & Company names the points between departments as one of the key factors behind lasting savings: the transitions where two departments jointly own a process – and where, as a result, neither owns it alone. A purchasing department negotiates a lower price; whether the requesting department actually orders to the new specification afterwards is outside the purchasing department’s control. It is at exactly this seam that a saving most often disappears – not through resistance, but through ownership that exists on paper and belongs to nobody in practice.

One owner instead of two participants

The obvious but usually ineffective reflex is an extra committee to ‘coordinate’ the interface. The more effective route runs the other way: a single person or function is given responsibility for the whole process – from specification through to invoice – instead of responsibility remaining split between two departments. That function then continuously answers a single question: has the agreed saving actually arrived this month – and if not, exactly where along the way was it lost?

That is a different remit from that of a project manager who rolls a programme out and then hands it over. It is a permanent responsibility, not a time-limited one.

Internal services get a price

A second lever concerns services one department provides internally without the receiving side seeing a price for them – IT support, internal logistics or central services, for instance. As long as these services appear free, nobody has a reason to question their actual scope. Internal recharging – an internal transfer price that is actually charged to the receiving department – changes that: the receiving side starts to examine the requirement, because it now shows up in its own budget. The effect is similar to that of a real market, just inside the company.

Why daily feedback does more than an annual review

The third point concerns the speed of feedback. A metric reported once a quarter arrives too late to change behaviour: by the time the report lands, the deviation has long since occurred and has usually already been forgotten. Shorter, more frequent feedback loops – daily or weekly metrics visible right at the point where the decision is made – have a considerably more immediate effect. Combined with regular, small improvement steps rather than a one-off major overhaul, a saving stays part of ongoing operations instead of becoming a one-off event that fades after a while.

Why an oversight committee alone is not enough

Some companies try to solve the interface problem with a steering committee of divisional heads that regularly reviews internal services and their costs. Such a committee can be useful, but it does not replace the single, permanently responsible function from the previous section – it complements it. The committee sets the framework and decides on contested cases; the daily monitoring of whether a saving is actually arriving is something a committee that meets once a quarter cannot provide. If only the committee is set up, without clarifying operational ownership, an additional handover point is created on top of the existing ones – not fewer.

Three questions for your own organisation

If you want to check whether your structure can sustain a saving, three questions will get you a long way:

• For every process that touches several departments, is there exactly one function responsible for the overall result – or do two departments share the responsibility in your company?
• Do internal services appear in the receiving department’s budget at a realistic value – or do they seem free in your company?
• Does the responsible function find out within days when a metric deviates from its target value – or only in the next quarterly report?

Two or three ‘no’ answers will usually explain to you more reliably why an earlier saving did not hold than any new list of cost-cutting measures could.