How transformational leaders are pivotal in reducing a cost base at pace
29 November 2016
When creditors are on your doorstep or competition is threatening your market position, immediate action is of the highest priority to protect one’s business. After senior management has defined the cost saving plan, implementation leads are selected on the basis of availability, familiarity, functional specialism, or BAU performance. An approach that often results in unnecessary resistance and delays.
Cost saving programmes require implementation leads who are generalist pioneers and challenge the status quo, rather than procurable detailed-oriented experts who build on it. This article provides insights to identify and mobilize the right programme leaders in all ranks to ensure a successful implementation of your cost saving plan.
Above all else, implementation leaders need to be able to persuade employees/stakeholders to surpass self-interest to reach cost saving goals. Transformational leadership has proven effective in meeting this objective. This leadership style is distinctly suitable for fast adoption of new initiatives and promotes risk-taking. It allows to govern without having direct authority which is required as often programme participants are sourced part-time from the business. This leader builds relationships beyond an exchange of rewards for compliance, and inspires by defining a clear need for change in painting a captivating picture for the future of the firm.
Its counterpart is transactional leadership in which the interaction between the leader and employee is based on hierarchical, one-size-fits-all relations. In acting consonant with the leader’s wishes, followers receive certain valued outcomes (e.g. wages and prestige). This management style is characterized by a laissez-faire principle; avoiding decision making and taking action only when standards are not met. These leaders flourish in settled environments and focus on planning and execution.
Although the two types are polar-opposites, the transformational leadership style can build on the tools from the transactional style– but not vice versa. For example, a common blend applied in cost saving programmes is inspirational leadership combined with altered incentive structures for a selected group of employees.
Transformational leadership is applied not by one individual but a core team. While the team shares the same vision, the respective leadership roles in the cost saving programme are tailored to the employees that are in their direct spans of control.
- Senior Executive Sponsor is the transformational leader of the cost saving programme. He/she can inspire and motivate employees with clear insights on how the cost saving programme will contribute to creating optimal value for their customers and enhance their competitive position in the market. The senior executive leads by example and clearly illustrates he/she is personally invested in the initiative.
- Programme Director fulfils the picture of the transformational leader by translating the cost saving plan into concrete initiatives and thinks both conceptually/strategically as practically. Highly sensitive to his/her environment, this person creates an appetite for change and brings in alternative ways of working.
- Work Stream Leads and team members are working closely with the functional teams to bring changes into their daily processes and routines.
- They need to engage employees through offering innovative solutions to practical issues that arise. To keep morale high, managers are fair and offer recognition for efforts made by the work stream members as well as the wider business.
- Stakeholders are the change agents that will influence the general perception in the firm, not through a formal but the informal channel. As they are not directly involved in the programme, their word is likely to remain unquestioned and will provide a tremendous push for the wider adoption for the programmes objectives.
At a 170 year old global bank/insurer, we reviewed the leadership styles and strengths of selected staff to mobilize a team of 40 implementing a pre-IPO cost reduction plan. The senior executive was able to engage the programme members and moreover the employees in functional lines that took pride in preserving the extensive legacy. The transformational implementation team was recruited through discussions with HR, management soundings, and interviews. This upfront time-investment paid off as the plan was delivered in months rather than years, and lowering the cost base by 5%.
Share your thoughts and experiences below or contact me for more information.