General and Administrative Efficiency - Reducing Costs by Removing Complexity

The Relationship Between G&A Costs and Your Business Model

General and Administrative costs are directly related to how complicated a businesses operating model is. While your business model does provide significant benefits to your customers, the complexity often found within each functional cell makes it hard to identify areas where these costs outweigh the benefits. The symptom many companies see is a rise in cost in these areas, highlighting the need to reduce complexity in order to control costs.

Leading companies achieve a balance between costs and performance by drilling down to the processes within each functional area and optimizing them. You will have achieved optimization within each unit when the benefit outweighs the cost and the unit is capable of integrating new business without adding to overhead.

Reducing Staff and Quick Fixes Are Not Always The Answer

Most companies in today's economy reduce their workforce to reduce costs. There are many legitimate reasons for doing this, such as a downturn in the number of orders for goods and services they are receiving. When they do this, they rarely cut the amount of work being done in each department outside of manufacturing or service delivery. In order to achieve and sustain world class service and maintain cost-efficiency, you must also make long-term improvements to the underlying processes. To address this requirement, companies will often apply quick fixes to problems. While this appears to have fixed the problem, it does not address the root cause. In fact, problems that often surface at the customer level are related to these quick fixes.

How to Improve General and Administrative Efficiency

In order to improve your general and administrative costs, you have to improve efficiency within each unit. Improving general and administrative efficiency requires the following:

• A focus on the customer - When evaluating and redesigning back-office operations, start from the customer's perspective. In order to improve the performance of your company, you need to identify those areas that add value to the customer. Remember that the "customer" in this case is anyone who receives the output of that particular function as well as the end consumer of your company's product or service.


• Detailed workflow mapping - By mapping the entire workflow at each individual workstation and then tying them to the departmental workflow, you will be able to identify duplicated and non value-adding activities. Non-value-added activities are those that do not improve quality, add value to the customer, or improve workflow.


• Change management and retraining - Helping your team to understand the goals of your organization, and how they personally can contribute and benefit from achieving them, will cause employees to identify areas where improvements can be made.

TML Can Help You Improve Your G&A Efficiency

Taking on the task of evaluating all of your general and administrative functions can seem like a daunting task, but it will lead to significant and sustainable benefits. I have been helping companies improve their general and administrative margins since 1998 and can help you too! Call me today to see how we can work together to prepare your company to grow.