In our last blog, we discussed how expense management needs to be viewed as a functional capability versus a one-time program. Similar to any other organizational capability, a successful expense management function needs to be deployed with a focus on people, process and technology and have the buy-in from senior management to be successful. Each of these pillars, play an important role in ensuring that expense management becomes institutionalized and part of the DNA of the organization.
At its core, we view expense discipline as an attribute of the firm’s corporate culture and the key stakeholders of that culture are the firm’s people. The employees of the firm need to understand that an expense management discipline, where quality and customer satisfaction is balanced against costs, is an ongoing priority of the firm. As importantly, they need to understand the importance of this priority and its alignment to the strategic goals of the firm. Much too often, employees see costs as what “management” controls and often results in a benefit that will be taken away from them! The paradigm has to shift to where they see the company’s cost similar to their own personal expenses and exercise the same level of discretion. They need to own it, manage it, and be rewarded for managing it well. All incentives must be aligned.
Once the employees are on board, they need to be supported by the proper policies and processes which enable a culture of expense management. Key to this enablement is the organization’s ability to provide the employees with the data and metrics that shed light on the attributes of costs. What are the drivers of demand for each expense item? Who are the providers of services and products that the organization consumes? Which activities account for what costs and why? Which products and clients consumes what costs and why? From simply understanding the spectrum of one’s suppliers, to putting in place sophisticated product and client profitability models, business intelligence empowers people to make educated decisions. These well informed decisions will then need to be complemented with proper governance and policies that can ensure sustainability.
Last, but certainly not the least, the processes and policies that enable an expense management discipline need to be supported by technologies that ensure ease of use, flexibility and sustainability. The Technology needs to be able to ingest, process, analyze and ultimately provide the business intelligence to make informed decisions.