Proxima’s research shows that labour costs are now less than 13% of revenues (based on the available data from FTSE350 companies). Even in the past three years, that figure has declined from nearly 16%. But why?
As Guy Strafford points out during this live webinar discussion, it’s actually simple. “Over the last 25 years the cost base of large organisations has been externalised,” he says.
“Henry Ford used to own rubber plantations, mines, steel furnaces and glass works – now car manufacturers are assemblers of components made by suppliers. This is as true for costs that are core to a business as it is for non-core costs – almost every organisation uses external marketing agencies, security firms, logistics providers, consultants and so on.”
This shift means organisations ought to be able to achieve much more significant savings from addressing the larger, and growing, slice of outgoings – the procured goods and services.
Yet headcount reduction is traditionally seen as the best way to tackle cost.
This raises a number of questions:
Richard Young spent eight years producing magazines for and about FDs, first as editor of Financial Director, then of Real Finance. Since 2006 he's been a freelance writer and editor, working with organisations such as Microsoft, the ICAEW, the Market Research Society, the CBI, PwC, the Mayor of London and the European Patent Office – as well as writing for a clutch of business and accountancy magazines and web sites, including Real Deals, CFO World, Research, Financial Management and Real Business. Richard is also the strategic editor for the ICAEW's seven Faculty magazines, and has chaired a number of conferences and web videos.
Jamie Lyon is head of corporate sector at ACCA and leads ACCA’s global research programme on finance transformation with a particular focus on finance effectiveness, the role of the CFO and talent development. Prior to ACCA, Jamie spent his career in industry with a number of FTSE 100 businesses.
Guy is responsible for key client relationships, advising on procurement strategy and business development across Proxima. Guy joined Proxima in 1996 and was an Account Director for a range of clients before taking responsibility for sales. Prior to training as a Chartered Accountant at KPMG, Guy studied politics, philosophy and economics at Oxford University. He is a regular speaker at procurement and management conferences such as SuperReturns, ProcureCon and ProcureCon Indirect, and commentator on the procurement industry. Guy is a Fellow of the Institute of Chartered Accountants, and a Fellow and Board Member of the Chartered Institute of Purchasing and Supply.