This special Board Report from the Financial Director Magazine showcases a number of private sector and not-for-profit organisations, who have already put the focus on effective cost management; and provides strategies on a critical cost issue in 2010 – the prospect of a significant hike in business rates. Includes an in-depth interview with Anthony Robb-John, Managing Director of easyGroup IP Licensing Ltd,

1. ADVERTISEMENT Published by
B O A r D r e p O rt
best practice in managing costs
CreAtinG vAlue tHrOuGH HOtel GrOup
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Interview with Anthony Robb-John, pluS COSt SAvinG
Managing Director, easyGroup IP
Licensing Limited
COST PERSPECTIVES THE UNTAPPED KEEPING BUSINESS
FROM THE BOARDROOM OPPORTUNITY RATES DOWN
Words of wisdom from Overlooked non-core Minimising the impact
board directors on managing operating costs provide of business rate rises
the bottom line bottom line boost from April 2010

2. ADVERTISEMENT
“t here is no doubt that cost supplies; and managed services, which will affect a large number of
reduction has made it to the top covering waste disposal, contract organisations across the country. But
of most board agendas during cleaning, catering, facilities management, where better to start than with an
the economic downturn. But, as talk of and security to name just a few. interview with Anthony robb-John,
recovery gains momentum, and with Managing Director of easyGroup ip
According to the YouGov study more licensing ltd, a company whose brand
the heaviest job cuts hopefully behind
than a third of respondents interviewed proposition of delivering great value
us, will cost and purchase management
continue to hold its seat in future said that their organisations had depends on effective cost management
”
board meetings? Moreover, as attention not put in place any cost reduction across its business operations.
turns to sales growth, how can cost programmes for such areas of business
savings that have been achieved in the expenditure since September last year
last year be maintained and which areas when the downturn took a real hold. in
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Is Your Business Costing You?, conducted perhaps there is a strong business case
by YouGov amongst some 1,300 board for going back to basics when it comes
directors and senior management in to cost and purchase management in
uK firms, one seemingly untapped area the future.
is those non-core operating costs that
are perceived to be inconsequential, but this special Board report showcases a
when added together actually have a number of private sector and not-for-
significant consequence for profitability. profit organisations, who have already
put the focus on non-core business
unfortunately this perception means expenditure; shares thought provoking
they fall below the Board radar and perspectives from the boardroom
go unchecked. these costs include a on effective cost management; and
large number of areas such as banking provides strategies on a critical cost
and finance; property and premises; issue in 2010 – the prospect of a Robert Allison
car fleets; logistics; office and industrial Managing Director
significant hike in business rates
expense reduction Analysts
Expense Reduction Analysts was founded in the UK in 1992 and today is
a global leader in cost and purchase management, focussed on helping
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its circa 150 consultants provide in-depth knowledge across more than 100 supply areas for
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Board Report published by www.expense-reduction.co.uk

3. ADVERTISEMENT
Creating value through Cost reduction
effective cost management - starts at HQ
the easyGroup way easyGroup is not only a role model
for best practice cost management, it
Anthony robb-John, Managing Director of easyGroup ip licensing is also helping businesses save money.
ltd, talks to Board report on why best practice cost management is One of Sir Stelios Haji-ioannou’s
critical, particularly to a company that trades on value for money. latest ventures, easyOffice, provides
‘no-frills’ serviced offices offering
Why is rigorous cost management they should remember they are there
particularly important to easyGroup? to make a return on investment. low-cost office space for as little
as £40 per desk per week, which is
Cash is king at any time but particularly What do you think have been the
simply booked and paid for online
during the current economic downturn. worst excesses of business expenditure
Also, if you want to offer your products over the last decade before the using a credit card.
to the widest possible market, you want downturn? Since its launch in October 2008,
to offer the best price, so obviously you You would expect me to say it, but it easyOffice has been established in
need to keep your costs down. has to be overspending on air travel london, Glasgow and Bristol. Other
in terms of increasing the profitability when companies like ours can provide sites are being identified around the
of easyGroup what degree of major cost savings in this area. country as part of a national rollout
importance do you place on managing What are your biggest programme.
costs versus growing the top line cost bugbears?
through sales? easyOffice is designed to provide
landlords - in the uK they ran the
You can cut costs and kill the business country in the old days so they got the greater flexibility than traditional
so you have to do both in equal laws they wanted and of course they commercial property contracts,
measures. entrepreneurs are here have had it their way with all the one presenting a low-risk investment.
to take calculated risks to grow the sided leases. the premises boast workstations
business. and optional add-on services such
the current crisis may be the turning
What was the best ever deal you point at least for some flexibility and as secretarial support and meeting
struck with a supplier and how did some balance. rooms.
you achieve it?
How important is culture in creating a Mark Smith, easyOffice CeO, says:
Circumstances change and you learn cost-efficient business?
from experience but probably our best “easyOffice has proved hugely
Culture makes it sound intangible, but popular as it provides space, which
and worst deals are with landlords – a
yes this is critical - you lead by example: is not only affordable but also offers
major cost for most businesses. So the
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lesson is just that – don’t lock yourself
and cabs get stuck, whilst a budget
in as things change so fast. lower risk by making it possible to
hotel is good for a city stay over. And
How much did you save in business spending the owner’s cash is no game, book just a single desk for a week, or
expenditure last year? no matter how small the sum. a whole office for a month, in a prime
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can see savings of at least 25%. get the best of both worlds - best price, information and to book office space
Do you think companies great service? visit www.easyoffice.co.uk
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i can’t really What areas of a business do you think
comment, will need the closest scrutiny in the
save to say forseeable future when it comes to costs?
that looking at
All! follow the money - start with the
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Board Report published by www.expense-reduction.co.uk

4. ADVERTISEMENT
THE UNTAPPED OPPORTUNITY
A recent study by market research company YouGov highlighted that day-to-day non-core
business expenditure is not on the radar screens of many organisations. And where cost reviews
had been undertaken, only around a fifth (22%) said that his had been done well.
Board report showcases businesses and not-for-profit organisations that are leading the
way in reducing such expenditure.
Hotel Group Serves Up
the team Approach to Best storage of electronic goods in need of £100,000 Plus Cost Saving
repair and has added a call centre to
practice Cost Management its list of services. But for all its success, the Berkshire-based Donnington valley
Harland is keen to emphasise the role Group, which is part of the peter Michael
that the company’s cost conscious Collection, a family owned business
culture has had on its growth. that both owns and manages hotel and
leisure operations, has been undertaking a
He continued: “We’ve always tried to significant cost management programme for
get the best price and service from the last two years and is £105,000 better
suppliers ourselves and, as an example, off as a result.
we spent 18 months researching the
stationery market to identify better
deals.
“However, to really achieve significant
With 400 per cent growth during savings and take things to the next
the last three years, Cornwall-based level, you can’t just compare prices; you
infoteam is a rare breed of business need to have a complete understanding
that continues to go from strength to of supply chains and good industry
strength even in these tough economic contacts. that’s where an external
times. But effective cost management consultant can come in and combine
is what really counts, according to the their expertise with your culture.”
company’s financial Director, recognising the need to focus on
the results of this approach speak reducing operating costs to generate
Simon Harland.
for themselves. infoteam has achieved profit improvement, but without a specific
“few companies are lucky enough to savings of 37 per cent on its stationery purchasing function, the company, whose
thrive during a recession,” says Harland. budget and its insurance premiums properties include the 5-star vineyard at
“But the secret to our survival – during have reduced to a three-year low, to Stockcross, the 4-star Donnington valley
good times or bad – has been knowing less than they were paying when the Hotel & Spa and the Donnington valley Golf
our business, providing a good service company had fewer employees Club, an 18-hole parkland course with a
to customers and keeping on top of and liabilities. Grade ii listed victorian clubhouse, identified
our costs. £2m of non-core costs for independent
“We’re on target to achieve savings
“Over the next two years we’re on of circa £300,000 in areas including analysis, such as utilities, laundry services,
target to make savings that are the energy, it, communications, packaging print and stationery.
equivalent of finding £1.5m in new and waste in the next two years,” says Says Daniel Buck, finance Manager for
sales, so it’s not just about cutting Harland. “And that’s just the start. the the Donnington valley Group: “We
costs for the sake of it. Strategic cost great thing is that all those savings will acknowledged that a more structured
management is actually an important go straight to the bottom line.” approach was needed to manage our
part of our growth strategy.” business expenditure. Key to this process
David Brassington, a consultant at
infoteam, established in 1996, repairs expense reduction Analysts, who led was the need to be sensitive to the needs of
and refurbishes modern-day essentials the cost review for infoteam, said: the business and our quality requirements.”
such as games consoles, laptops and “Analysing whether you’re paying for An in-depth analysis of the company’s
pDAs on behalf of global brands more than you need, creating a cost business expenditure led to cost savings in
including Sony, Acer, Sun Microsystems conscious culture and questioning several core areas, including 44% and 29% on
and toshiba. increased charges are all examples of business and promotional print respectively
ways that cost savings can be made – a total of over £51,000. this was due to
today, the company is also the uK’s
and they’re more efficient than simply the fact that the cost review had revealed
market leader in the logistics and
reducing headcount, for example.” that the leisure Group was better off with
Board Report published by www.expense-reduction.co.uk

5. ADVERTISEMENT
Cost Conscious finance that helps to save thousands of
young lives every year.
Charities Andy Hibbert, Director of finance, it and
engaged in the struggle for animal welfare Administration, has been responsible for
around the world, the World Society for ensuring the £60m charity continues to
the protection of Animals (WSpA), has operate efficiently during the economic
faced stiff challenges during the global downturn.
economic crisis. Whilst WSpA’s income
continues to increase in each of the Hibbert said: “We take the need to
countries where it raises money, once maximise our income – and therefore the
converted into uS dollars the charity has money we raise for the hospital – very
less to spend. seriously. As with most charities the
recession affected our income and the
financial Director, Henry Bennett, is cost of fundraising required redress, so we
responsible for ensuring that the uK- decided to look at ways to manage our
a single local printer, who could meet all
headquartered charity’s £38m annual costs more effectively.
their needs, rather than using one or two
budget is managed efficiently and focussed
larger national companies. on achieving charitable objectives. faced “Our activities include campaigns,
with the financial crisis and needing to developing corporate partnerships, direct
the review also identified a significant mail, legacies, the general public and large
opportunity to make savings on stationery. implement budget cuts of £3m, Bennett
undertook a review of costs that has scale events, and it all takes people,
the company had a number of suppliers time and money to organise.”
in this area. these were streamlined and already identified savings of over £200,000
per year.
better payment terms were negotiated,
leading to a 22% saving on stationery. Bennett said: “lots of charities, who
Another focus area of the cost reduction are dependent on global fundraising,
programme was laundry services. have laid off staff due to volatility in the
currency markets. Many, including us, are
Says Daniel: “We wanted the right financed by income generated in western
supplier at a better price. As part of the currencies, but they’re simply not worth
tender process for the business we asked as much as they were.
potential suppliers to actually make a bed.
“for us reducing headcount isn’t the right
We wanted a provider, who could be
option – doing so reduces your ability
competitive on cost, but also maintain the to raise money at a time when you need
high standards aspired to by the Group. it most and means you’re ill-prepared
the result was a 14% reduction in costs when the recovery comes, so it’s a false
equating to circa £36,000.” economy.
A further 21% and 15% cost savings “the volume of our activities are huge so Hibbert continued: “We conducted
were achieved for utilities and landline even seemingly small savings can result in a thorough analysis of how we were
telephone respectively, largely through massive annual reductions.We’ve reviewed spending our money, which revealed
renegotiating with existing suppliers. the cost of printing and worldwide potential savings of between 40% and 60%
distribution of our publications, marketing in areas including stationery, printers and
the leisure and hotel group has also and direct mail materials, hotels, airfares photocopiers. Maintaining the quality of
introduced market competitor ‘health and telecommunications. goods and services we receive, however,
checks’ to ensure they continue to get remained a priority throughout.
best value for money in terms of price “in each case our goal has been to either
and service. make savings or improve the level of “We’ve saved £77k so far by better
service we receive. Our first preference understanding our needs and securing
Says paul Gannon, a consultant with has been to renegotiate with our existing contracts to match. We’ve renegotiated
expense reduction Analysts, which carried suppliers, cut out the things that we good prices with existing suppliers and
out the forensic analysis of Donnington don’t need and get the best prices and thereby retained those relationships,
valley Group’s business expenditure: improved service for what we do. in most whilst also implementing internal
“Hotels have an opportunity to reduce cases we’ve managed to retain the benefit procurement procedures, such as
costs, without compromising service. of existing relationships, whilst making creating ‘authorised’ product lists.
savings of up to 50%.
“from our experience in the sector, “A key challenge to realising savings is
this could include, but not limited to, “every pound we save on overheads is creating a cost-conscious organisational
available to spend on charitable objectives culture – this takes time and leadership,
consolidating small suppliers to reduce
or more fundraising – the less we spend, but the outcome is worth it. Aside from
process costs; encouraging closer working the more we have to offer. reviewing putting more spend towards achieving
relationships with suppliers which lead to our cost base has directly benefitted the charitable objectives, you know you’re
shared risk and reward; avoiding rolling charity and has changed our approach to running an efficient operation.”
lease agreements; and seeking ideas from procurement.”
staff and rewarding them when their ideas Both organisations partnered with
save costs.” As the fundraising arm of Great Ormond expense reduction Analysts to review and
Street Hospital, the Great Ormond Street reduce their costs.
Hospital Children’s Charity generates the
Board Report published by www.expense-reduction.co.uk

6. ADVERTISEMENT
Cost perspectives from
the Boardroom
Garvis Snook, Chief Executive, Rok plc, property repair and maintenance specialists
“Many years ago, a mentor taught me that leaders of service businesses, despite their long
held beliefs, cannot directly control the major element of cost in their businesses without
compromising the brand proposition. Aggressively cutting people numbers has a short term
impact leading to reduced sales and disaffected employees who further damage the brand.
Downturns are the moment at which, far from cutting front line people, businesses should find
ways to invest more heavily in their training and communicating what differentiates the brand
in the market.the result is increased market share whilst allowing natural wastage to reduce
absolute cost.”
Neil Munn, Director of Finance, Clarke Willmott, national law firm
“there is a saying ‘look after the pennies and the pounds will take care of themselves’.Whilst this may
seem simplistic it can potentially have large rewards.With the country in recession we had already
examined our cost base, concentrating on material cost savings such as headcounts and capital projects.
However, it wasn’t until managers were challenged to review costs on a line by line basis that the level
of savings that could be accumulated through a fairly insignificant cost base were identified. A few
cost-cutting initiatives such as printing to cheaper machines, increased use of second class post and a
reduction in hospitality for internal staff meetings has not only delivered savings but has brought about a
change in the way costs are considered.”
Jeff Stanton, Non-Executive Chairman, London City Bond, the UK’s
largest dedicated wine and spirits logistics provider
“random cost cutting doesn’t work. By this i mean the type that suggests that a percentage of
all costs should be taken out. Costs that are cut in this manner either quickly return or have
such a detrimental affect on customer service that it damages the business. Most costs usually
relate to people. Assuming, that even in this twitter and facebook generation most people spend
their time at work doing a productive job, then the only real way to cut cost is to examine what
they actually do.this zero-based budgeting approach, if carried out together with the individuals
concerned is likely to produce lasting results. Question why? is it really necessary? is there a
better way?”
David Collett, Chief Executive Officer, GreenCO2 plc, provider of energy assessment
and consultancy services
“ever-increasing energy legislation combined with spiralling energy costs mean that carbon emission
reduction is now on every business agenda. But being ‘greener’ relates directly to the bottom line, as the
simplest way to spend less on energy is to use less of it! intuitive energy management & control systems,
requiring no specialist staff, enable involvement across all levels of an organisation.this style of approach
engenders behavioural change and proves to be at least three times more effective than ‘top down’
directives. 10-20% cost savings are typical within the first year. Moreover, innovative ‘save-to-save’ funding
schemes for energy initiatives do away with upfront capital approval delays. So the quicker you implement an
energy saving project, the sooner you will reap the budgetary rewards.”
Board Report published by www.expense-reduction.co.uk

7. ADVERTISEMENT
A selection of Board Directors
give their words of wisdom when
it comes to managing costs.
Mike Lea, Managing Partner, Smith & Williamson, independent investment management and
financial services group
“the key issue is to focus on reducing your variable costs rather than fixed costs, with people costs being an
obvious target. for example, many employers are searching for alternatives to redundancy that allow them to
reduce staff costs, while keeping the talent in their business.this could include initiatives such as a recruitment and
pay freeze, overtime ban, job sharing, reduced hours, sabbaticals and a robust performance management policy. A
word of warning, check employment contracts before you start to talk about any potential changes and do take
advice before attempting to make changes to contractual terms.”
Del Brett, Managing Director, Future Inns
“Being in the highly competitive hotel industry and having launched three new hotels in the last four years with
value being at the heart of our brand proposition, rigorous cost management has been critical to our successful
launch into the uK, particularly during a downturn.With hundreds of business expense items to deal with each
month, the importance of combing line by line the monthly accounts cannot be emphasised enough. At times
of economic downturn, deals can be done in most areas of the business, and it is critical to maintain a pattern of
prompt payments to suppliers as they will often respond by offering attractive early payment discounts. it does
not matter if you save just £1 on one item, as lots of small cost saving wins become a big win for the bottom line
and help sustain profitability.”
Ian Mackinnon, Chief Executive Officer, Swallowfield plc, a full service provider to global brands
and retailers in the beauty, personal care and household goods marketplace
“it is important that you are honest with all employees about the need to reduce costs but at the
same time provide them with a vision for why it’s worth doing so. it has been really beneficial for us
to engage with employees and let them take ownership of a continuous improvement process to
drive down costs. As George S. patton. America’s greatest combat general of the Second World War
remarked: ‘Don’t tell people how to do things, tell them what to do and let them surprise you with
their results.’
Rod MacKinnon, Headmaster, Bristol Grammar School
“in education the biggest challenge is not to compromise on the quality of the essentials of learning and
provision. . if anything we may spend more in some areas in tough times.We look at what is ‘good’ rather
than essential and aim to reduce costs on the less than essential. it’s about the right amount of money, spent
on the right deliverables and benefiting the most students.”
Chris Head, CEO, Meningitis Research Foundation
“there really isn’t a “magic bullet” theory for good cost management.
it’s about making sure all the usual elements of control – accurate
budgeting, tight expenditure authorisation, up-to-date management
accounts – are in place and working well. if your systems are below
par this is definitely the time to fix them.”
Board Report published by www.expense-reduction.co.uk

8. ADVERTISEMENT
Cost Focus: Business Rates
Organisations across the UK face the prospect of a large hike in business rates
in 2010 after receiving new rating valuations for their properties. Paul Giness, a
property consultant with Expense Reduction Analysts, explains all and offers
advice on how to minimise the impact on the bottom line.
Organisations across the uK, already
battling against the economic downturn,
have received another setback, with ACTION AGAINST BUSINESS RATE HIKE
business rates due to rise significantly • thoroughly review your letter from the valuation Office Agency and ensure there
as from next year.
are not any obvious errors. for example, a warehouse on part of the site on which
Businesses, public sector and not-for- you are located may have been demolished or you may not occupy the whole space
profit organisations will have received as stated in the letter, upon which the rateable value has been calculated.
a letter highlighting a new rating valuation
of their properties, which will take effect if you are unsure whether the new rateable value is correct, look at getting a review
from April 2010. the rating revaluation by an expert who will analyse your rent, the prevailing market conditions during 2008
is carried out every five years by the and advise if the hypothetical rental value attached to the property more than a year
valuation Office Agency (vOA) and ago was accurate. if you can prove any errors you can go through an Appeal process
rateable values on properties are used from 1st April in england,Wales and Scotland. Appeals in Scotland will have to be
to determine annual business rates. lodged by the end of September 2010.
they are calculated using a hypothetical • if you have not yet appealed your 2005 assessment or there has been some physical
rental value, taking into account property change to your site since you last appealed, it could be worth trying to get a
type and location amongst other things. backdated saving. However an Appeal must be lodged before the current list window
the new rateable values have been closes on 31st March 2010.
calculated on the rental values of
• if the rateable value appears correct, then there are a number of ways to offset the
properties as they stood at April 2008,
when they were near their peak just costs of a subsequent rise in business rates from 2010:
before the economic downturn. the key - look at increasing space utilisation, sub letting any space saved or claiming empty
issue is that the rental values of two years rates relief on the space not used. However, businesses need to be aware that
ago do not reflect the current market empty rates relief changed in 2008. effectively there is now less relief available than
for rents. experts predict that rateable before and this means that most property that has been empty for more than three
values in england will increase by around months – or in the case of industrial property, for more than six months - will no
19% compared with the last revaluation longer receive relief from rates. in the majority of cases empty property beyond
in 2005 and by 15-20% in Wales and these relief periods will be responsible for 100% of the basic occupied business rate,
approximately 10% in Scotland. although there can still be opportunities that could be worth discussing with an
However, there are actions that expert.
organisations can take to minimise - renegotiate the lease by exchanging something that is of benefit to the landlord.
the impact of the new rateable values - if your lease is coming up for renewal, consider moving to offices of comparable
on the bottom line. size within an area of lower rent and rates.You can compare your rating valuation
to that of other properties in your area or to properties of a similar type at
www.voa.gov.uk.
Board Report published by www.expense-reduction.co.uk