The baseline nobody wants to sign
Every efficiency programme claims results. Very few can prove them, because the starting point gets agreed when it is already too late.
by BVH Consulting2 min read
Halfway through every cost reduction programme comes the same awkward moment: somebody asks how much has been saved, and it turns out the answer depends on who is doing the arithmetic.
This is not bad faith. It is that the starting point was never fixed precisely, and halfway through everyone reconstructs the story in a way that suits their own incentives.
Why the baseline is uncomfortable
Fixing the baseline means writing down what a process costs today. It is a number somebody in the company should already have, and it is often worse than what has been reported so far.
That is why the baseline discussion is the hardest conversation of the project, and why it tends to get postponed: work starts on the solutions, which are more pleasant to discuss, and the measurement will be sorted out later.
Except that later it does not get sorted out. Later it becomes a negotiation.
What makes a baseline usable
One source. The number has to come from an identified system, through a repeatable query or extract. If it needs a hand-built spreadsheet, the baseline will not survive its first challenge.
An explicit perimeter. Which units, which cost lines, which period, with which exclusions. The exclusions must be written at the start: adding them later is the most common way to produce savings that do not exist.
A signature. No ritual is required: what is required is that the function head and the project lead state in writing that this number is the starting point. From then on, the discussion can move to substance.
The unexpected benefit
Companies that do this exercise almost always discover something before any intervention begins. Rebuilding the true cost of a process forces you to bring together data that lived in different systems, and in that step the anomalies surface: the line that grows without explanation, the cost centre with twice the incidence of its peers, the volume nobody had ever added up.
In several engagements the measurement phase produced more value than the intervention phase. Not because the intervention was useless, but because for the first time somebody was looking at the numbers as a whole.
A practical rule
If an efficiency programme cannot produce a signed baseline within the first three weeks, the problem is not measurement: it is that the organisation has not yet decided it wants the result.