RESEARCH

Cost Transparency: Optimising the Firm-wide Cost Base


2/4/2020 - Monocle Research Department

Customer experience improvement and shareholder value optimisation almost always feature as top goals for any executive in a large organisation. These goals are shared across different functions and divisions and big ambitious strategies are formulated in order to meet them. However, in practice and in the day-to-day running of the organisation, the actions of those tasked with reaching these lofty goals are not always aligned, especially with respect to becoming cost efficient with the aim of allocating available funds where it is needed most – the continuous improvement or transformation of the business. 

 

The key for any business to grow sustainably is to continuously innovate and to stay ahead of the curve when it comes to technological changes, industry disruptors and ever-increasing competition in the market. This focus on innovation and improvement informs the Transform The Business (TTB) activities of the organisation and must be allocated adequate funding to be successful. However, most businesses struggle to limit their everyday operational expenses, also referred to as the Run The Business (RTB) costs. Whilst there are numerous reasons for this, such as the rapidly increasing costs of labour and utilities, as well as currency depreciation, the inability to provide transparency in the costs and cost allocation methodologies is one of the single biggest contributing factors.

 

A lack of cost transparency has several negative side effects which must be examined in the context of a shared services provider on the one side (e.g. Information Technology, Finance, HR and Marketing) and the shared services consumer on the other.

 



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