Hi Namshi,
Congrats on your new challenging position!.
Indeed it is great to get a brief – especially clear cut one to reduce the costs and revise the HR policies. Of course, developing a cost-reduction strategy that maximizes efficiency without compromising growth potential is a tricky proposition!.
Before you undertake the exercise, please do the review;
Manpower costs : How does it compare with the Industry standards?..It's easy to retrench costs but not a long term solution..as it can damage your image to attract the talent to your organization and impede the growth plans of the company. It has to be well thought exercise by the reviewing the individual's contribution to the Organization and benchmarking their CTC to the Industry may give some ideas. Outsourcing might seem to be an easy answer.
In many industries, contracting out non-core business functions such as billing, or payroll to third-party providers is gaining acceptance.
Here one needs to revamp the PMS …Do this at later stage.
Structural costs : Study the cases of Pharma companies like Ranbaxy, Dr Reddy's lab as how they reduced the costs by hiving off or cut their research costs by separating the units involved in developing new drugs, thereby addressing investor concerns on low operating margins. Similar exercise can be undertaken for the design & developments departments…
Review the fixed costs like;
Rentals if applicable which is normally constitutes 50 % of overheads..
Employee benefits and compensation costs.
Marketing costs especially the advertising and try to seek alternative methods if the present ones are not giving incremental effect on sales.
Material and production costs – if your Procurement/sourcing manager is able to get the right quality at the best prices in order to be competitive to improve your product margin.
Please review the whole organization as a whole in comparison with the Industry trends and also review the budgets plans – Actuals v/s planned may give some indicators/ideas.
Best Wishes,
Rajat Joshi