1. The Sustainability of
Cost Reduction Processes
Overhead Cost Reduction Processes are Important to European Companies
www.ebs.edu/ime www.expensereduction.com

2. Imprint
Publisher:
Expense Reduction Analysts
Suite 24, 40 Churchill Square
Kings Hill, West Malling
Kent, ME19 4YU
U.K.
Strascheg Institute for Innovation and
Entrepreneurship (SIIE) – EBS Business School
Burgstraße 5
65375 Oestrich-Winkel
Germany
Editors:
Christoph Schneider
Arnd Görner
Prof. Dr. Ronald Gleich

3. Summary Most companies still use standard cost control-
ling methods for their overhead costs manage-
The importance of overhead costs reduction ment. Less than half of the companies acknowledge
processes is highlighted by the majority of firms. the application of methods for comparison. An active
More than 83% of all companies that filled out the comparison of costs via the use of purchasing price
survey confirmed to have undertaken an overhead analysis or the application of benchmarking with
costs reduction process throughout the last three competitors is only done by 43.5 % and 42.5%.
years.
Furthermore, employees seem to be of high
Energy most important cost category. Regard- importance when initiating and implementing
ing the different types of overhead costs, energy is a cost reduction process. Companies should be
by far the most important type. 43% of all partici- aware of the risk they take when not actively involv-
pants name energy as one of the three most impor- ing their staff in such a process. Especially the most
tant types of costs. Other frequently mentioned cost sustainable companies involve and keep their em-
categories are marketing, logistics, freight and travel ployees well informed throughout the process.
management.
Savings are used to increase profit margins – less
than half of the companies reinvest the savings.
In that perspective the studies shows that sustainable
companies more often tend to reinvest the money in
the development of new markets and already exist-
ing markets than others.
Cost reduction processes start as result of not
reaching financial goals. Mostly companies started
a cost reduction process in their overhead spending
as they failed to reach their desired profit margins,
made losses or were not competitive enough com-
pared to their competitors. However, sustainable
companies have a more active treatment of their Table of Contents
overhead costs and start programmes proactively
not because of external pushes. Introduction 5
Results of Expert Interviews 6
Sustainability and Innovativeness of Participants 7
Sustainability 7
Innovativeness 8
Planning of Overhead Costs 9
Companies Prove to be Cost-Sensitive 9
The Most Important Types of Overhead Costs 10
Processes 14
Process Success 18
Usage of Savings 24
Annex 26
Literature 26
Table of figures 27

5. Preface
Printing, logistics, travel management, or freight
are commonly known examples of cost categories
often denoted as overhead costs or indirect ex-
penses. However, many companies do not focus on
actively managing these costs since they consider
achievable margins to be small and view many cat-
egories as indispensable. So far, not much research
has been conducted to explore the hidden potential
of these cost categories and to analyse how and if
overhead costs can be managed and reduced.
Hence, EBS Business School and Expense Reduction
Analysts initiated this survey in order to investigate the
importance of overhead costs, the success and success
factors of overhead costs reduction processes, and the
processes’ sustainability. 301 managers from seven
European countries responded to the questions, there-
by making it a valuable source of information for both
managers and academics interested in the subject.
Opposed to the general perception, the study finds
that companies do take their overhead expenses
seriously. According to the firm representatives ques-
tioned, more than 83% confirm to have carried out
an overhead costs reduction process in the last three
years in their respective enterprises.
However, such processes are rarely the result of
careful planning or aim at obtaining a sustainable
cost situation. In many cases, they are rather initiated
as a reaction to immediate financial threats.
Employees appear to play a prominent role for the
success of overhead costs reduction processes. Com-
municating the need for such action to staff and
actively integrating employees into the process can
have a positive impact on the reduction processes.
Managing overhead costs should not be considered
a burden to management but a chance to make busi-
nesses more efficient and sustainable.
Sincerely,
Prof. Dr. Ronald Gleich

7. Preface
Long-term-studies have shown that the period over
which companies stay competitive in a market is
shortening constantly. Only the well positioned com-
panies are fit enough to survive in times of increasing
global competition, complex supply chains and short-
ened cycles of global financial instability.
Well positioned means, companies that are able to
adapt to changes in their environment quickly. Key
aspects worth mentioning here are innovation and
economic sustainability. In particular, economic sus-
tainability, the efficient use of accessible sources, is
often rated with a lower priority within companies –
at least as long as sales and turnover are performing
well. In an economic down turn – as we have seen
during the last financial crisis – sales revenues de-
cline rapidly and companies need to cut costs but the
challenge is not jeopardising their productivity.
Economically sustainable companies have one thing
in common: they do not react to external threats
with harsh knee jerk cost cutting programmes. These
companies utilise professional cost management
techniques on a regular basis and continue to use
these tools even in times of prosperity. Furthermore,
they use the achieved savings in the business as part
of their current business strategy; be that investing
in RD, developing new and existing markets or
building up reserves for other strategic initiatives. A
cost conscious culture provides for a healthy balance
sheet and a more valuable business.
In order to find out how well positioned European
companies are in terms of sustainability, the EBS
Business School and Expense Reduction Analysts
created this survey and analysed the answers of 301
companies from 7 European countries. The results
clearly show in which areas sustainable companies
are better positioned than others.
Fred Marfleet
Chairman, Expense Reduction Analysts

9. Introduction towards reduction processes and the processes’ success.
A further step is to analyse differences between more and
Non-core costs, commonly called overhead costs, often less sustainable companies regarding their treatment of
provide considerable potential for savings. Causing only overhead costs.
minor disruptions for the companies’ business opera-
tions, savings can be obtained without consuming much In a last step, the study seeks to identify potential success
time and efforts. Especially small and mid-sized compa- factors for a future-oriented management of overheads.
nies often seem to neglect the potential for savings in
their company. A thorough multi-stage research process was applied. In
a first step, relevant literature was analysed in order to
In contrast to strategic cost areas such as research de- build a framework for the course of investigation. Base
velopment or investments, overhead costs have been on this, a semi-structured interview guideline was deve-
subject to investigation by only a few scientific studies, loped and discussed with practitioners. In a second step,
partially even dating back to the 1980s and 1990s. 11 interviews with industry experts from a variety of in-
dustries were undertaken in which current topics concer-
EBS Business School and Expense Reduction Analysts ning overhead costs and respective reduction processes
therefore decided to undertake a study on cost-reduction were identified and discussed.
processes in the area of overheads and their sustaina-
bility. It is the study’s aim to investigate how European Taking these findings, a structured survey was developed
companies deal with the issue of overhead costs and res- and made available to managers from European compa-
pective reduction processes. In detail, the study examines nies via the internet. Between March 2011 and May 2011,
the types of overhead costs, the companies’ awareness 301 managers completed the survey.
• Analysis of importance of overhead costs in several
European markets
• Investigation of the relationship between cost-reduction
processes in the area of overheads and the companies‘
sustainability and innovative behaviour
• Deduction of the importance of cost categories across
industries and countries
• Comparison of more and less sustainable companies with
regard to the execution of cost-reduction processes
• Investigation of the companies’ view on external
knowledge
Defining Overhead Costs . Office Supplies . Marketing
. Printing . Travel Management
Overhead costs, often labelled as non-strategic or indirect costs, . Energy . Telecommunications
are costs not directly assignable to a certain unit. Instead, they . Waste Management . Packaging
are mostly assigned to a group of products or to the production . Freight . Insurance
process in general. Overhead costs include (e.g.): . Logistics . Etc.
1
Vgl. z.B. Foster Gupta 1990; Cooper 1990; Cooper Kaplan 1988.
5

10. Results of Expert Interviews The term sustainability itself was interpreted differently by
the participants. Therefore, a thoroughly developed multi-
The interviews with experts from a variety of industries dimensional construct will be used in the second stage of
show a high relevance on the topic of overhead costs for the study.
today’s companies.
The managers interviewed highlighted the maintenance of
The majority of participants highlighted the importance of a their working processes’ and products’ quality as a major
cost-sensitive culture for their companies concern regarding the execution of cost-reduction proces-
ses in the area of overheads. Upholding the quality is ex-
The participants’ perception of their companies’ degree of pressed to be of utmost importance
sustainability and innovativeness showed a lot variety.
Fig. 1 | © Expense Reduction Analysts
Sample 11 companies
Data Collection Tool Open interviews, guided along a semi-structured interview guideline
Data Collection Method Personal interview
Survey Period 10th of December 2010 until 31th of January 2011
Companies by Respondents’ Position | N = 11 Companies by Number of Employeesr | N = 11
Other
1
Managing Business Unit
Director 6 4 Manager /
2 6 3
Department Head
100 100 – 500 500
Percentage of Overhead Importance of Overheads
No estimation
important very important
3 4 ca. 20%
6 5
40% 1
3
20–30%
6

11. Sustainability and Innovativeness of 3. Based on the index values, three groups of companies
were identified (right part of the diagram). The three
Participants groups constitute the “most sustainable companies”
(29.1%), the „sustainable companies“ (43.8%) and the
One of the core issues is to analyse cost-reduction pro-
„least sustainable companies“ (27.1%).
cesses in the light of the executing companies’ success
regarding sustainability and innovativeness. As a first step
The companies that proved to be sustainable from an eco-
of the large-scale European survey, the necessary const-
nomic perspective, nearly 84% confirm this statement.
ructs for measuring innovativeness and sustainability are
Another 64% report the observation of ecological im-
defined and explained.
pacts while 61% acknowledge to take social impacts into
account. Nearly three quarters of all top managers are
Sustainability
considered to perceive their companies as sustainable.
Sustainability is operationalised using the three dimen-
sions ecology, economy and society with the indicators
long-term orientation of goals, subjective assessment of
the top management’s view and personal assessment.
1. In the left half of the diagram shown below, the cumu-
lative percentages of the respective mentions are listed
2. The respective indicators values are averaged and
converted into an „index of sustainability“, ranging from
0 to 100.
Fig. 2 | © Expense Reduction Analysts
In our company Disagree Agree Index of Sustainability
we place value on …
100 80 29,1 %: Most Sustainable
… observing economic impacts 4 84 Companies;
Ø Index Value 89,8
… long-term goals 8 80
61–79 43,8 %: Sustainable
Companies;
… observing ecological impacts 19 54 Ø Index Value: 71,3
indicated
… observing social impacts 16 51
From our top management
7 74 0–60 27,1 %: Least Sustainable
teams‘ perspective, we are a
Companies;
sustainable company
Ø Index Value: 48,2
0
I would personally regard our 10 65
company as sustainable Ø Index: 70,4
N = 301; in %; scale points 12 and 45 are
summed up, point 3 not considered
7

12. Innovativeness
Similar to the index of sustainability described before,
an index of innovation has been constructed. It com-
prises the participants’ assessment of their companies’
degree of innovativeness and of their belief regarding
their company’s top management’s view on this issue.
Additionally, the index includes the employees’ openness
towards new ideas or issues.
Less than half of the participants consider their company’s
employees to be open towards new things. Interestingly,
more than half of them do, nevertheless, consider their
company as innovative.
Fig. 3 | © Expense Reduction Analysts
Disagree Agree Index of Innovation
In our management board‘s 100 80 16,6%: Highly Innovative
15 61
perception we are an innovative Companies;
company Ø Index value: 88,8
41–80 58,1%: Innovative
Companies;
I would personally describe our 18 53 Ø Index Value: 63,6
company as innovative
indicated
Our employees are always 18 45
willing to learn new things
0–40 25,2%: Least Innovative
Companies;
Our employees are open-min- 21 41 Ø Index Value: 33,6
ded towards new things 0
Ø Index: 60,2
N = 301; in %; scale points 12 and 45 are
summed up, point 3 not considered
8

13. Planning of Overhead Costs
Companies Prove to be Cost-Sensitive
Increasing competition in global markets and shortening
product life cycles are examples for current trends that
highlight the importance of an effective cost management
for European companies. Monitoring overhead costs and
identifying potential for reduction enables companies to
proactively enhance their efficiency.
Nearly Three out of Four Companies Acknowledge to
Control Their Costs in Precisely Defined Periods
As a prerequisite for applying an effective management
of overhead costs, firms have to be cost-sensitive in order
to build the necessary awareness. 72% of the interviewed
companies acknowledge to periodically controlling their
costs. 62 % are confident to immediately react to a deteri-
oration of their cost situation.
Fig. 4 | © Expense Reduction Analysts
The following statements essentially deal with the handling of costs.
To which degree do they apply to your company?
Disagree Agree
We control costs in precisely defines periodical cycles 11 72
Our company reacts immediately to a deterioration in the cost situation 8 65
We give increase in tumover proority over cost reduction 31 34
N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered
9

14. The Most Important Types of Overhead Costs Costs, associated to marketing and logistics take the places
two and three. Further cost categories that were menti-
Regarding the different types of overhead costs, energy oned by more than 20 % of all participants are freight
proves to be the most important one to European compa- and travel management. It is interesting to note, that four
nies. 43.2 % of all participants name energy as one of the out of these five categories appear to be energy-intensive
three most important types of costs to their respective (energy, logistics, freight and travel management).
company. (Fig. 5)
Differentiating the cost categories by countries allows for
interesting insights into differences across regions. While
energy proves to be an important cost category in all re-
gions, marketing expenses play a central role in Finnish,
German and Italian firms, but are much less relevant in
Fig. 5 | © Expense Reduction Analysts France and Belgium. (Fig. 4)
Energy 43,2
Marketing 28,2 Logistic costs take second place in Belgium and Italy but
Logistics 27,2 fall far behind in the Netherlands.
Freight 25,2
Travel Management 20,6
Freight turns out to be the most important cost category
Facility Mangement 19,9
Telecommunications 18,6 to the responding French firms and are equally important
Maintenance 16,9 as energy to their counterparts in Spain but are nearly dis-
Insurance 15,6 regarded by Italian respondents.
Fleet Management 14,6
Packaging 9,3
Printing 9,0 Travel management is most often named in Italy while
Office Supplies 8,3 Belgian and German firms seem to place more empha-
Taxes 8,3
sis on other areas of overhead expenses, Dutch firms do
Factory Consumables 8,0
Waste Management 5,6
hardly name this category at all.
Cleaning 5,3
Other 4,7 Facility management is what the Finnish respondents do
Couriers 3,0
care about, but plays only a minor role to their colleagues
Security 2,7
Industrial Gases 1,0 in France and Spain.
Uniforms 1,0
Merchant Card Fees 0,3 Telecommunication costs are often named by Belgi-
Up to three choices possible
an and Dutch firms, maintenance costs are a burden for
French respondents.
Fig. 6 | © Expense Reduction Analysts
60 Germany France Italy Spain Netherlands Belgium Finland
50
40
30
20
10
0
Energy Logistics Travel Management Telecommunication Insurance
Marketing Freight Facility Management Maintenance Fleet Management
Up to three choices possible
10

15. Only 18.3 % of all responding companies realise overhead-
related purchases through decentralised departments,
while 37.9 % confirm to have centralised purchasing de-
partments. (Fig. 7)
Centralised purchasing provides the purchasing party
with greater buying power and, therefore, a more
powerful position in negotiations. Decentralised pur-
chasing may have the advantage to enable the company
to profit from specialised knowledge of specific categories
and local supplier advantages. Fig. 7 | © Expense Reduction Analysts
Decentralised
Nearly 44 % of all companies combine both ways of pur- bodies
chasing in order to profit from the respective advantages. 18,3 Central
purchasing
43,9 37,9
Especially the highly sustainable companies seem to ap- Both
ply both forms of purchasing. As it can be seen in Fig. 8,
more than 56 % of the highly sustainable companies use
this combination in contrast to only 34.6 % in case of the
least sustainable companies.
Fig. 8 | © Expense Reduction Analysts
Companies still stick to „classic“ instruments and Sustainability
methods for managing their overhead costs
Low Average High
A variety of tools and methods exist, that companies may Central 40,7 38,2 34,0
purchasing
apply to their cost management. Most companies in the
Both 34,6 44,2 56,6
sample (62.8 %) still use only standard cost controlling
methods for their overhead costs management. More Decentralised 24,7 17,6 9,4
bodies
than 60 % of the firms engage in negotiations. (Fig. 9)
N = 301; in %
Less than half of the companies acknowledge the appli-
cation of methods for comparison. An active comparison
of costs via the use of purchasing price analyses or the
Fig. 9 | © Expense Reduction Analysts
application of a benchmarking with competitors is only
done by 43.5 % and 42.5 %.
Cost Controlling 62,8
A special tool designed for the management of over- Negotiations 60,1
Purchasing Price Analyses 43,5
head costs is the overhead-value analysis. Despite its
Benchmarking 42,5
special design only a minority of companies confirm the
Acquisition Price Comparison 32,2
use of an overhead-value analysis as a tool for managing
Contract Management 30,2
overheads.
Cost Allocation Sheet 29,6
Internal Cost Allocation 28,6
Supplier Ratings 26,9
Ratio Systems 23,3
Overhead-Value Analysis 12,0
Checklists 11,3
Other 0,3
Multiple entries possible
11

16. Across Europe, the various instruments’ use is quite
diverse. While traditional cost controlling is named by
nearly three quarters of all firms in Germany and Finland,
only 35% of Spanish firms report to use cost control-
ling. Negotiations are the most important instrument for
Belgian French and Dutch respondents. Purchase price
analyses are applied by half of the Spanish and Dutch
firms while only every fifth French firm in the sample con-
firms their use.
An equally diverse picture can be obtained by looking
at benchmarking: 64% of the Dutch firms claim to use
benchmarking, in contrast to only 20% of the Italian com-
panies. Acquisition price comparison plays a major role to
the Dutch, Belgian and French respondents, but is hardly
mentioned by firms from Finland or Spain. Internal cost
allocation is named by 42% of Finnish and 40% of Ita-
lian firms. Great differences can also be identified regar-
ding overhead-value analysis. While 44% of the French
respondents use it as a tool, only 4% of the German and
3% of the Finnish firms confirm to do so.
44% of the French companies use the specially de-
signed tool overhead-value analysis - but only 4% of
the companies in Germany and 3% of companies in
Finland
Fig. 10 | © Expense Reduction Analysts
Germany France Italy Spain Netherlands Belgium Finland
Cost controlling 74 61 50 35 41 50 71
Negotiations 64 70 45 52 73 77 52
Purchase price analyses 45 22 30 52 50 36 48
Benchmarking 43 35 20 52 64 32 48
Acquisition price comparison 24 65 30 9 73 68 13
Contract Management 27 52 25 17 23 41 32
Cost allocation sheet 36 26 35 22 9 23 23
Internal cost allocation 34 22 40 0 9 32 42
Supplier ratings 30 35 5 39 27 27 3
Ratio systems 40 30 5 9 0 5 0
Overhead-value analysis 4 44 10 22 14 18 3
Checklists 14 9 15 9 5 14 7
Multiple entries possible
12

17. Companies that do report to use an overhead-value While it can not be deducted that the level of satisfaction
analysis show greater process satisfaction is only dependent on the tool or method chosen for over-
head-costs management, results can still act as an indica-
In a next step, the frequency of the respective methods’ tor and trigger firms to critically assess their management
application is compared to the level of satisfaction that accounting tools and methods applied.
companies show regarding the overall cost reduction
processes. Firms that acknowledge applying the over-
head-value analysis to their company’s overhead costs
management show a high level of satisfaction regarding
the overall cost-reduction process. As it can be seen in the
table below, companies applying overhead-value analy-
sis, purchase price analyses and checklists reach higher
scores regarding process satisfaction than the companies
applying other methods or instruments.
Fig. 11 | © Expense Reduction Analysts
Frequency of Mention
1
2
4 3
1 Cost controlling
2 Negotiations
5
3 Purchase price analyses 8 6 7
4 Benchmarking 9
10
5 Acquisition price comparison
6 Contract Management
7 Cost allocation sheet 11 12
8 Internal cost allocation
9 Supplier ratings
10 Ratio systems Process Satisfaction
11 Overhead-value analysis N = 301
12 Checklists
13

18. Processes
Companies actively drive overhead-costs reduction
processes
Asking the companies whether they have carried out an
overhead-costs reduction process during the last three
years, more than four out of five companies confirm to
have done so. Only 16 % negate this statement. Out of
the companies that did not carry out such a process, more
than half report to concretely plan or at least consider it.
This reduces the total percentage of firms that are averse
to a reduction process to 6 % of the total sample. (Fig. 12)
Fig. 12 | © Expense Reduction Analysts
Regarding the companies that report to have undertaken
a reduction process, more than a third acknowledge to Have you carried out processes to reduce overhead costs in the
have undertaken the reductions with support by a specia- past three years in your company?
lised consultancy. Yes
Yes, without support by 43,9
Across Europe, the picture drawn is fairly stable. Spanish specialised consultancy
Yes, with support by 39,5
and French companies in the sample appear to use exter- specialised consultancy
nal support by consultancies more often than their Finnish
No
and German counterparts. In sum, less Italian firms have
Considered 7,0
carried out reduction processes in the past three years,
Neither considered nor 6,0
but those that have not show a great tendency to consi- planned
der doing so. The percentage of companies that has not Concretely planned 3,7
carried out such a process and reports to neither plan nor
N = 301; Answers in %
consider it is quite similar across all countries. (Fig. 13)
Fig. 13 | © Expense Reduction Analysts
Have you carried out processes to reduce overhead costs Germany France
in the past three years in your company? Finland Spain
Netherlands Italy
Belgium
60
50
40
30
20
10
0
Yes, without support Yes, with support by Planned Consider Nothing at all
by consultancy consultancy
14

19. In a further step, the 6 % of companies negating to even Cost reduction processes as a mere reaction of not
consider a reduction process were questioned with regard reaching financial goals
to their reasons for not doing so. The majority of these
companies answered to have other current priorities. In- Regarding the reasons for undertaking reduction pro-
terestingly, 7 firms named the belief to already work cost- cesses, the view is twofold. The analysis indicates, that
efficiently in the area of overheads as a reason for not overhead-cost reduction processes are often a direct re-
planning or carrying out a reduction process. Referring to sult of an assessment of the short-term performance or
the total number of firms, this part of the companies that as a reaction to current threats. Companies in the sample
answered the survey is quite small, accounting for only mostly initiate reduction processes as reaction of not re-
2.3 % of the whole sample. (Fig. 18) aching predetermined financial goals. Half of all respon-
ding companies acknowledge to have failed on reaching
Other priorities reason for not carrying out cost the desired profit margin as a reason. A further 23 % con-
reduction processes firmed that the reduction processes were initiated as a re-
action to losses. Another 29 % assessed its own company
as not profitable enough but came to this conclusion by
actively comparing the company to other competitors in
the field. (Fig. 15)
In contrast to these results, a positive view can be taken
upon the involvement of employees. 70 % of the com-
panies acknowledge using suggestions of employees in
order to identify potential improvements in the area of
overheads.
Fig. 14 | © Expense Reduction Analysts Fig. 15 | © Expense Reduction Analysts
Disagree Agree
If such a process is neither considered nor planned: what are the
reasons for this?
Potential for improvements in the area of overheads were identified in
our company using internal sources
Disagree Agree
13 70
At the moment we have other priorities
The company did not reach the desired profit margin
0 78 29 51
We already work efficiently in the area of overhead costs Potential for improvements in the area of overheads were pointed out
to our company through external sources
12 41 45 28
Such a cost-reduction process cannot be communicated to our staff at Our company was not profitable enough in
the moment comparison with our competitors
44 25 49 29
The company made losses
61 23
N = 18; in %; scale points 12 and 45 are summed up, N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered point 3 not considered
15

20. Sustainable companies have a more proactive treat-
ment of overhead spendings
In a further step, these results are compared to the com-
panies’ level of sustainability. The analysis indicates that
more sustainable companies tend to have a more active
treatment of overheads instead of purely reacting.
Reducing overhead costs as a reaction to not having met
the desired profit margin is most often named by those
companies that can be considered as less sustainable.
Saving potentials identified by internal sources seem to
be used much less as a justification for introducing reduc-
tion processes in the area of overheads.
In turn, the most sustainable companies acknowledge
that internal sources are a major driver of overhead-costs
reduction processes. More sustainable companies do not
tend to introduce reduction processes as a mere result of
losses or missed profit margins. These results can be con-
sidered as one indication for a more forward-looking way
of cost management.
Fig. 16 | © Expense Reduction Analysts
Reasons for Introducing Cost-Reduction Processes (by Sustainability)
Potential for improvements in the area of overheads were identified in
our company using internal sources
The company did not reach the desired profit margin
Potential for improvements in the area of overheads were pointed out
to our company through external sources
Our company was not profitable enough in comparison with
our competitors
The company made losses
1 2 3 4 5
1 = Disagree 5 = Agree
high
middle
N = 301; mean
low
16

21. Looking at the groups involved in the reduction processes,
one observes a major role of internal positions that are in-
corporated. The management board is the most important
group, with their incorporation being confirmed by 94 %.
Accounting and purchasing staff is also a major contribu-
tor to reduction processes. 89 % report the incorporation
of accounting staff and 85 % do the same for purchasing
professionals. Production staff is still being named by
nearly 65 % of respondents.
Management board deals with reducing overhead
spendings
41.5 % report to integrate specialised consultants as a
source of external knowledge into the reduction process.
Every third firm acknowledges having individual experts
on board. Management consultants are incorporated into
the process by only 26 % of the firms.
Fig. 17 | © Expense Reduction Analysts
Which of the following groups are incorporated in an overhead reduction process?
Management board 94,4
Accounting staff 89,3
Purchasing staff 85,0
Staff from other departments 74,8
Production staff 64,6
Specialised consultants 41,5
Individual experts 34,1
Management consultants 26,1
Other 15,2
N = 301; in %
17

22. Process Success
Results show a general satisfaction with overhead reduc-
tion processes carried out in the various companies in the
sample. More than two thirds of all respondents express a
general satisfaction. Only 7.2% are disappointed with the
results. Interestingly, companies that report the highest
satisfaction level concerning the overhead-costs reduc-
tion processes, on average achieve the highest ranking
on the sustainability index. (Fig. 18) While the least satis-
fied companies reach a score of 67.6 %, the most satisfied
companies reach a score of 79.5 , 17.6 % more. (Fig. 19)
Sustainable companies more satisfied with achieved
savings
Fig. 18 | © Expense Reduction Analysts Fig. 19 | © Expense Reduction Analysts
Mean: 3,70 ∑ =68,2 Process Satisfaction
Sustainability Index
79,5
∑ = 7,2
73,1 -11,9
1,3 5,9 24,7 58,2 10,0
67,6
1 2 3 4 5
Not satisfied very High
at all satisfied Average
Low
N = 301; in %
18

23. During the expert interviews participants highlighted the
importance of maintaining the quality of their products
or services despite the cost reduction process. Results of
the survey show that the products’ or services’ quality
is not influenced negatively by the reduction processes.
78 % confirm that the quality of their services or products
remained the same after the reduction process.
Quality of products and services is not negatively in-
fluenced by cost reduction processes
Furthermore, 68 % of all firms confirmed that their emplo-
yees had learned to pay more attention to overhead costs
in the course of the reduction process. No clear effect can
be determined regarding the reduction processes’ influ-
ence on the atmosphere in the respective companies. 31 %
confirm a positive influence while 25 % report a negative
influence. Therefore, it can be assumed that a reduction
process’ influence on the working atmosphere depends
on the individual firm culture and special circumstances
that can be found in the firm.
Fig. 20 | © Expense Reduction Analysts
Disagree Agree
The quality of our products / services remains
the same even after the cost reduction proces
7 78
In the course of reducing overhead costs our staff
have learned to pay more attention to those costs
12 65
The atmosphere in the company was positively
influenced by the cost reduction process
25 31
N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered
19

24. The most sustainable firms in the sample are able to obtain
the best results in reduction processes. These companies
are able to deliver the best results of all three sustainabi-
lity types in all three dimensions discussed. Sustainability
therefore, seems to contribute to the successful imple-
mentation of these processes. (Fig. 21)
For successfully carrying out reduction processes a num-
ber of factors show clear support from respondents. Im- Fig. 22 | © Expense Reduction Analysts
plementing the recommended measures is of crucial
It proved/proves important for the success of overhead cost
importance for the success. Furthermore, informing the reduction processes that …
staff about the changes and making sure that employees
understand the need for the measures is also of utmost Disagree Agree
importance for success. Leaving staff out of the process,
… recommended measures are also implemented and
therefore, appears to endanger its success. (Fig. 22) do not simply remain on paper
3 87
In addition to staff involvement, a majority of 58 % of re-
… the staff are informed about
spondents confirm an important role of suppliers. In their
the need for the measures
opinion, suppliers need to be involved in order to be suc- 3 85
cessful. 15 % do negate this statement.
… the staff understand the
need for the measures
Respondents do not give a clear idea of whether manage-
2 81
ment should react to objections from staff referring to the
measures of the reduction process. While 39 % of respon- … the staff are actively involved in the
formation of the processes
dents answer accordingly, 31 % do not agree.
7 75
… the suppliers are included
15 58
… the company management make the final
decision without staff involvement
31 39
N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered
Fig. 21 | © Expense Reduction Analysts Resistance or Barriers (by Sustainability)
The quality of our products / services remains the same even after the
cost reduction process
In the course of reducing overhead costs our staff have learned to pay
more attention to those costs
The atmosphere in the company was positively influenced by the cost
1 2 3 4 5
reduction process
1 = does not apply at all 5 = Fully Applies
high middle low
N = 301; mean
20

25. Analysing these statements with respect to sustainabili-
ty, answers show a clear tendency: The most sustainable
companies vote for an active involvement of staff. Less
sustainable companies are more reluctant to do so. With
regard to management’s commitment to objections from
staff regarding the process, the more sustainable compa-
nies seem to reject the idea to decide without involve-
ment of staff while the other groups of firms show no
clear picture.
Sustainable companies involve staff more often
Fig. 23 | © Expense Reduction Analysts
It proved/proves important for the success of overhead cost Success Factors by Sustainability
reduction processes that …
… recommended measures are actively implemented
and do not simply remain on paper
… the staff are informed about the need for the measures
… the staff understand the need for the measures
… the staff are actively involved in the formation of the processes
… the suppliers are included in the process
… the company management make the final decision
1 2 3 4 5
without staff involvement
1 = does not apply at all 5 = Fully Applies
high
middle
N = 301; mean low
21

26. When carrying out overhead costs reduction processes,
Fig. 24 | © Expense Reduction Analysts
various resistances or barriers may exist. Respondents to
the survey do not draw a clear picture regarding the poten- In the following we present you a number of statements regar-
tial types of barriers. However, the largest consent can be ding resistance or barriers which can emerge when implementing
identified regarding staff that fears changes and, therefore, the cost reduction measures. How do/did the statements regar-
ding resistance or barriers apply to your company?
acts dismissively. 42 % of respondents acknowledge this
as a major problem in their company. In contrast to this, Disagree Agree
difficulties in switching suppliers are confirmed by only
every fifth respondent to be an important barrier. (Fig. 24) Staff feared changes and acted dismissively
31 42
Results are therefore twofold. On the one hand, they in- Due to organizational reasons the
dicate that a multitude of potential barriers or resistances implementation was difficult
40 30
may prevent reduction processes from being carried out
successfully. Each company should consider which fac- During the processes implementation
tors might be of particular importance to it. On the other the business environment changed
hand, employees seem to be of great importance, even 44 27
across company borders.
Difficulties in switching suppliers
42 21
More sustainable companies seem to encounter less pro-
blems arising from staff fearing changes and acting dis- Staff feel their work is put into question
39 32
missively. One potential reason for that could be that a
company’s commitment to sustainability in general increa-
ses employees’ trust and loyalty which prevents them from N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered
initially reacting dismissively in case of changes. (Fig. 25)
Fig. 25 | © Expense Reduction Analysts
In the following we present you a number of statements regarding resistance or barriers which
can emerge when implementing cost reduction measures. How do/did the statements regarding
resistance or barriers apply to your company?
Resistance and Barriers by Sustainability
Staff feared changes and acted dismissively
Due to organizational reasons the implementation was difficult
Difficulties in switching suppliers
During the process implementation the business
environment changed
Staff feel their work is put into question 1 2 3 4 5
1 = does not apply at all 5 = Fully Applies
high
N = 301; mean middle
low
22

27. Implementing measures and controlling their All four measures received great support from basically all
success are important parts of a successful reduc- respondents regarding their importance, only the compi-
tion process lation of measures was confirmed by „only“ 89 %. The in-
vitation to tender for the necessary service also received
Cost reduction processes can be split up into the support by 59 % of respondents. Using external bench-
following four groups: marks is considered to be important by a relative majority
of 46%.
a) Status Quo Analysis
b) Compilation of a List of Measures
c) Implementation of Measures
d) Control of Success
For each of these phases, respondents were asked to rate
the phases’ respective importance for the process’ suc-
cess. The same was done for two additional steps that
were deducted from the expert interviews and further
discussion.
Fig. 26 | © Expense Reduction Analysts
How important are the following steps for the success
of overhead cost reduction processes?
Not important Important
Controlling of activities‘ success
d 95
Implementing recommended measures
c 2 94
Carrying out a status quo analysis
a 3 91
Compiling measures
b 2 89
Invitation to tender for the necessary services
11 59
Use of external benchmarks
20 46
N = 301; in %; scale points 12 and 45 are summed up,
point 3 not considered
23

28. Usage of Savings Saving money from overheads can therefore be a way to
substantially increase the competitiveness of a company
The study wanted to shed light on the question for which by identifying funds that are invested in order to improve
purpose the companies use savings that were achieved in the company’s competitive position and long-term success.
the course of overhead reduction processes. (Fig. 28)
The simple increase of profit and efficiency is the major Most companies use the achieved savings for
goal for the firms in the sample. Investment in existing increasing profit margins – not for reinvestments
business is claimed by 36.7 %. Although being of minor
importance, this still means that every third company
uses the money saved from over head reduction proces-
ses for a long-term goal such as investment in business.
In addition to that, a quarter of the companies report to
invest the money saved in new areas of business. 17.9 %
report to direct the money to research and development
and 17.6 % confirm to invest it in completely new markets.
(Fig. 27)
Fig. 27 | © Expense Reduction Analysts
What did you do or are you intending to do with the
achieved savings?
1 Increasing profit 72,9 Fig. 28 | © Expense Reduction Analysts
2 Increasing efficiency 66,9 Frequency of Responses
1
3 Investment in existing 36,7
2
business
4 IInvestment in new 24,7
areas of business
5 Research Development 17,9
3
6 Investment in new markets 17,5
4
7 Advertisement 8,0 5 6
8 Pay rises 4,4 7
9 8
9 Other purpose: 2,8
Increasing Sustainability
Multiple entries possible N = 251
24

29. Results across countries are quite similar regarding the In the following graph, companies are grouped with res-
savings’ purpose of use. Belgian firms are the ones which pect to their geographical origin and then compared re-
most often mention the increase of profits as a purpose. garding their degree of innovativeness and sustainability.
Investment in existing business is acknowledged by more In addition the symbol’s form and colour indicates the
than half of all French respondents and 45% of German group’s relative cost sensitivity and satisfaction with the
firms. While entries for investments in new markets are reduction process. (Fig. 30)
generally scarce, more than a quarter of German firms
confirm this purpose. Every third Italian firm does the
same for research and development. (Fig. 29)
Fig. 30 | © Expense Reduction Analysts
Innovativeness
Finland
France
Germany
Belgium
Spain
Netherlands
Italy
Sustainability
High Cost Sensitivity High Process Satisfaction
Average Cost Sensitivity Average Process Satisfaction
Low Cost Sensitivity Low Process Satisfaction
Fig. 29 | © Expense Reduction Analysts
Germany France Italy Spain Netherlands Belgium Finland
Increasing profit 69 79 75 72 76 85 77
Increasing efficiency 68 53 50 72 71 75 69
Investment in 45 53 25 11 19 25 31
existing business
Investment in 28 37 33 0 5 25 19
new areas of business
Research Development 22 21 33 0 14 10 8
Investment in new markets 26 21 8 0 5 15 0
Advertisement 7 16 8 0 10 20 4
Pay rises 4 5 0 0 0 5 4
Other purpose 2 5 0 6 5 0 8
Multiple entries possible
25

30. Literature
Banker, Rajiv D. / Potter, Gordon / Schroeder, Roger G.
(1995): An empirical analysis of manufacturing overhead
cost drivers, in: Journal of Accounting and Economics 19,
S. 115–137
Foster, George / Gupta, Mahendra (1990): Manufactu-
ring Overhead Cost Driver Analysis, in: Journal of Accoun-
ting and Economics 12, S. 309–337
Heimbrock, Jürgen Klaus / Deil, Thomas (2004): Erfolgs-
potentiale im strategischen Einkauf, in: Horst, Bruno /Söhn-
chen, Wolfgang (Eds.): Wertschöpfung und Supply Chain
– Festschrift für Prof. Dr. Heinz Tempel. Shaker Verlag
Held, Stephan / Kijak-Koselnik, Olha / Uhlenbroch, Rene
(2009): Strategisches kostenmanagement. Anwendungs-
stand bei den 500 umsatzstärksten deutschen Unterneh-
men. In: Beiträge zur Umweltwirtschaft und zum Control-
ling Nr. 35, Universität Duisburg-Essen
Monden, Yasuhiro (1999): Wege zur Kostensenkung.
Verlag Vahlen,
O.N. (2005): Wertsteigerung im Einkauf – Studie zur
Erschließung von Potentialen in nicht-traditionellen Be-
schaffungsfeldern. Studie von Deloitte, Universität der
Bundeswehr München und dem Bundesverband Material-
wirtschaft, Einkauf und Logistik e.V.
Rosenstein, Roman A. (2008): Den Gemeinkosten auf
der Spur, in: Swiss Engineering STZ Oktober 2008, S. 36–37
Schwarz, Walter (1983): Die Gemeinkostenwertana-
lyse nach McKinsey Company, Inc. Eine Methode des
Gemeinkosten-Managements.
Versteeg, Andre (1999): Revolution im Einkauf. Campus
Verlag
26

31. Table of figures Fig. 17: Groups Involved in the Cost Reduction Process
Fig. 1: Results of Expert Interviews Fig. 18: Success of Process
Fig. 2: Index Sustainability Fig. 19: Success of Process by Sustainability
Fig. 3: Index Innovativeness Fig. 20: Effect of Quality and Service-Level
Fig. 4: Planning of Overhead Costs Fig. 21: Effect of Quality and Service-Level
by Sustainability
Fig. 5: Most Important Types of Overhead Costs
Fig. 22: Importance of Employers
Fig. 6: Most Important Types of Overhead Costs
by Countries Fig. 23: Importance of Employers by Sustainability
Fig. 7: Organisation Procurement Fig. 24: Barriers Introducing a Cost Reduction Process
Fig. 8: Organisation Procurement by Sustainability Fig. 25: Barriers Introducing a Cost Reduction Process
of Companies by Sustainability
Fig. 9: Use of Procurement-Tools Fig. 26: Important Steps for Successful Cost
Reduction Process
Fig. 10: Use of Procurement-Tools by Countries
Fig. 27: Usage of Achieved Savings
Fig. 11: Satisfaction with Results by Use of
Various Procurement-Tools Fig. 28: Usage of Achieved Savings by Sustainability
Fig. 12: Implementation of Cost Reduction Process Fig. 29: Usage of Achieved Savings by Country
Fig. 13: Implementation of Cost Reduction Process Fig. 30: Process Satisfaction by Country and
by Country Sustainability and Innovativeness
Fig. 14: No Cost Reduction Process Planned
Fig. 15: Reason for Introducing Cost Reduction Process
Fig. 16: Reason for Introducing Cost Reduction Process
by Sustainability
27

32. www.expensereduction.com