Posted tagged ‘Government Cost Cutting’

Government Cost Cutting Strategies

May 17, 2010

Stephen Goldsmith the former Mayor of Indianapolis and a recent appointee by Mayor Bloomberg to become Deputy Mayor of New York is highly regarded for his cost cutting track record. Goldsmith has written an interesting article about successful strategies to cut costs that others may find to be useful.

Some highlights from the article:

1) Unequivocal Executive Sponsorship

Cost cutting is tough, unpleasant work. It requires choices that most of us would rather not make. As a result, the most important characteristic for a successful cost cutting effort is unwavering leadership from the most senior elected officials.

2) Clear and Publicly Communicated Goals

Public sector cost-cutting efforts need clear, quantifiable goals that are publicly communicated to staff and citizenry. When we began our cost-cutting efforts in the City of Indianapolis in the 1990s, the original goal was to save $1 million a month (later increased to $4 million a month). We believed those amounts were the minimum required to fund the fiscal challenges the City was facing. That “stake in the ground” was essential as it informed the thinking and activity of all city mangers and staff. It was also important that citizens understood the goal as we made the tough choices required to get the city back to financial health.

3) Long Term Vision but Short-Term Activity

While it is important to have a long-term vision of where you want to get, it is even more important that you immediately begin the work of reducing costs. In addition to the obvious benefit of generating savings more quickly, early activity helps drive creativity, innovation, and additional cost savings. Said another way, cost savings activity builds upon itself; the more cost savings you find and capture, the more cost savings you will see in new and different areas. This is because cost-savings activity, especially when driven by innovation, begins to transform the organizational culture.

4) A Single Point of Accountability and Ownership

While executive leadership is essential, governors, mayors, county executives, and legislators are simply too busy to manage day-to-day cost-savings activity.  These programs require intense and sustained focus over very long periods of time. In addition, there is no shortage of ideas on how to cut costs. Whether the ideas come from committed employees, engaged citizens, or the business community, most elected officials have more ideas than they can analyze. As a result, it can be very hard to separate the great ideas from those that won’t work.

The best approach is for the top elected official to appoint and empower a single individual to manage cost-cutting activity. While they may be supported by departmental staff or outside volunteers, someone needs to “own” the task and, ideally, report directly to the chief executive.

5) Get Input From Employees Entrepreneurs

One of the best ways to identify great ideas to reduce costs is to talk with incumbent employees and private partners. Many jurisdictions have employee suggestion programs and most jurisdictions hear lots of ideas from private sector partners. We are, however, recommending a much more structured program designed to rapidly accelerate the identification of high-quality cost-savings ideas. Creating a disciplined, ongoing process to identify, triage and then implement ideas from employees and entrepreneurs was critical to hitting our goals.

6) Incentives Matter

Providing bonuses to public sector employees based on performance is not without controversy. When used correctly, however, financial incentives for public employees will drive down costs. Whether it is reducing time lost to accidents, eliminating shrinkage in the parts room at the garage, or stopping unnecessary end-of-the-year spending, public employees will focus on reducing costs when they are appropriately incentivized. Financial incentives for city employees were one of the most effective strategies we found to create goal congruence between public employees and the citizens they served.

What do you think of these cost cutting strategies?