Strategy & Operations » Leadership & Management » Guest Opinion: Why facing large budget cuts is a good reason to review processes

Guest Opinion: Why facing large budget cuts is a good reason to review processes

Having your budget cut overnight by 15% could be an opportunity to ensure your business is working efficiently

IT HAS been almost 30 years since the housing sector saw any fundamental changes in legislation. But 2015 saw widespread reform for the first time in a generation which could potentially change our landscape forever.

The chancellor’s July Budget imposed a 1% cut in social housing rents each year beginning in 2016 – a huge gap from the increases previously projected, taking about £650m out of Aster’s long-term business plan. We also saw proposals to extend Right to Buy and the housing sector being reclassified by the Office of National Statistics as public bodies.

Prior to this, Aster had launched a new group strategy, in which we made a commitment to delivering as many new homes as possible, helping to address the urgent need for housing of all tenures. These changes left us with big decisions to make. How could we provide as many of these new homes now that our annual budget had been reduced by 15%?

The immediate reaction may have been – and has been by some organisations – to cut hard and fast, but we believed a carefully measured approach was needed.

We decided this was an opportunity to review our processes, identify efficiency savings and innovation opportunities, and reinvent our organisation as a more commercial and lean business. This makes us more sustainable in the long term and allows us to retain core skills and services. Taking time to realign our budgets with our strategy may have taken slightly longer than an immediate hard cut, but it means we are now in the best possible position to adapt to a continually changing operating environment, grow our business and achieve our vision that everyone has a home.

Key to the success of this approach was bringing every area of the business on the journey with us. By being clear and transparent with colleagues, we were able to get everyone thinking more efficiently and finding new and innovative ways of working – a much more considered approach than simply stripping lines out of the budget.

My advice to others facing large budget cuts would be:

Focus on your strengths This may sound obvious, but knowing the strengths of your organisation and understanding what you do well is crucial. Focusing on a small number of core objectives and delivering them as well as you can is a better approach in testing times. In Aster’s case, we’re here first and foremost to provide homes. No matter how the housing sector changes in years to come, people will always need somewhere to live – so our business model is focused on delivering that strategy.

Be ambitious Even with a reduction in budget, you should still try to think big. A major shift in your business sector may seem daunting, but it often gives you the chance to take control and protect yourself going forward.

For us, the changes in our sector mean that we do have a real opportunity to shape our own future, so if there is another shift in government policy, it’s unlikely to adversely affect us. That could see us building more homes for open market sale to generate funds that can be reinvested. We are a not-for-dividend business, so the profit we make is immediately ploughed back into our development and corporate social responsibility programmes.

Share expertise Collaborating with your competitors may be an alien concept in some sectors, but the value of sharing skills and expertise shouldn’t be underestimated. Don’t forget that any sector-wide changes are going to affect your contemporaries too. There are many mutual benefits to pairing up with organisations that have similar objectives – you may be able to provide each other with services you wouldn’t have access to alone.

Be brave One of the themes in our new strategy is that we will be brave and bold to deliver new homes. This is where innovation is so important – you can’t do things in the same way because you always have. If you’re a financially strong organisation, take a budget cut as an opportunity to encourage the business to innovate and do different things.

Make the most of your existing assets Another obvious point but it’s easy to get complacent. Collaboration is crucial here – teams with different expertise might be able to spot an opportunity to maximise an asset’s value that another team wouldn’t have seen.

John Brace is the group resources director and deputy chief executive of Aster Group. Aster Group has assets exceeding £1bn and employs 1,500 people

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