Show Me the Money: The Importance of Demonstrating Hard Savings to Senior Management

When we start a new project with a client in our consulting practice, we often begin with a presentation to senior management to brief them on the initiative and ground them in the expected outcomes. Again and again, we find senior management reminding us of the importance of focusing on the financial impacts of the project and being explicit about the savings. And that means hard savings in particular – various means to reduce costs, such as shedding headcount.

While financial accounting is standardized across all firms, cost accounting is not. From my experience, each firm considers costs differently, such as fixed, variable, controllable, sunk, and allocated costs, to name a few. It’s important to understand exactly what your firm considers “hard” costs. Typically, I ask to see several business cases or cost justifications from the prior year which gained management approval. These examples give me the best perspective on what is acceptable and expected at that company.

In addition, it’s typically the case that many different projects are vying to claim many of the same savings. For example, an enterprise content management (ECM) project might look at the time spent in a call center authoring a letter (vs. a form-driven approach); the same time savings might be part of an alternative business case that the call center folks are driving. As both teams race to complete their efforts, sometimes the only means of identifying the overlap is at the senior management level – not ideal.

So how do you get on the same page with those other people in your organization who are looking to cut the same costs? In my opinion, the most effective approach to addressing this challenge is good old-fashioned networking. Experienced project managers, business analysts, and financial analysts have been on lots of projects and know many peers. Checking in with them to identify any overlap shows thoroughness.

But there’s one more aspect to impressing management with “hard” savings, and that’s to consider timing. More than once, I’ve been reminded that current and next-year savings are about the longest senior management is interested in sponsoring. This short-term thinking should dominate your perspective (even though your intent is to consider the long term).

In addition, from a timing perspective, you need to be careful with money that has been “spent” – which, in corporate terms, means budgeted and allocated, even though the cash might not have spent. To address this challenge, my approach is to work with the finance folks and interrogate them on operating processes. Most often, there is someone who knows the ropes and can coach you.

So there you have it: some of the finer points of how to go about demonstrating the financial impact of your proposed technology initiative to senior management. When IT dollars are tight, it pays to know what executive management is looking for, and figure out how your initiative fulfills it.

Rich Medina
James Watson
I’m President and co-founder of Doculabs, serving as executive sponsor on consulting engagements for financial services clients.