Our client needs to cut costs by 15%: where do you start?

• That you ask for the cost structure before proposing savings. Suggesting renegotiating rents when they are a tiny share of the total wastes everybody's time.
• That you compare. A cost is only high relative to something: the previous year, another of the client's sites, a competitor.
• That you separate what can be cut quickly from what requires changing the organisation, and that you see the side effects on quality, lead times or sales.
• That you add it up. The target is a precise percentage, and the interviewer expects you to check whether your levers get there.

1. 1

   Understand the reason and the constraint

   Why 15%, by when, and what must be protected at all costs: quality, jobs, a service level?
2. 2

   Break down the cost base

   Follow the path of the product or service: purchasing, production, logistics, sales, head office functions. Ask for the weight of each item and focus on the two or three largest.
3. 3

   Look for gaps

   For each large item, compare with a benchmark and split it into price paid times quantity used. A gap on price is handled by negotiation, a gap on quantity by organisation.
4. 4

   Propose, size and rank

   For each lever, an estimate of the saving, the timing and the risk. Add them up, compare with the 15%, then recommend an order of implementation.

"Our client is a mid-range hotel chain that has to cut its operating costs by 15% in two years. Before going further: does this target come from pressure on its margins, and are there parts of the guest experience it does not want to touch?

I would start by asking how the costs of a typical hotel break down. I expect staff to be the largest item, followed by energy and maintenance, linen and consumables, then commissions paid to booking platforms. For each large item I would look at two things: the gap between hotels in the network, because the best ones show what is achievable without inventing anything, and the split between what we pay per unit and how much we use. If staff is indeed the largest item, I would look for instance at housekeeping hours per occupied room from one hotel to another..."

This example is made up: it shows the tone and the construction, not a script to memorise. Your answer has to come from your own experience or from the data the interviewer gives you.

• Proposing an even cut across all items. It is easy to say, but it cuts as much into what drives sales as into what serves no purpose.
• Jumping straight to job cuts without having looked at purchasing, energy or how work is organised.
• Ignoring consequences. Reducing front desk staff can lower satisfaction and repeat visits, which costs more than the saving.
• Not adding up. Three good ideas that total 6% do not answer the question.