Asset recovery already plays a recognized role in maintaining discipline over cost drivers. For example, member data collected by the Investment Recovery Association indicates that investment recovery departments save their companies an average of $8 million annually. Furthermore, member data shows that 70 to 90 percent of every sales dollar generated by investment recovery goes straight to the bottom line as profit. Once your organization or department defines its value chain, a cost analysis helps identify strategies to develop a cost advantage by reducing primary and support activities’ costs, re-organizing the value chain, or both. In his value chain model, Michael Porter identifies 10 cost drivers. Investment recovery professionals can improve their organizations’ cost advantages by specifically addressing many of these variables.
3. Capacity utilization. Investment recovery professionals specialize in optimizing every asset to maximize capacity and expand opportunities, accomplishing more in the same cost structure.
6 and 7. Degree of vertical integration and timing of market entry. These are corporate cost drivers that rarely effect asset recovery operations.
8. Organization’s policies of cost or differentiation. Organizational policies that recognize investment recovery as a worthy alternative, or mandate IR as the first consideration in procurement, contribute to its use and credibility. Such policies also can improve the likelihood of pursuing and completing projects at lower costs.
9. Geographic location. IR professionals can minimize transportation costs by locating or deploying assets as close to operations as possible. As companies become increasingly global, IR groups also can play an important role in reducing taxes and import/export duties.
The surest way to strengthen IR’s position as a valuable internal asset is to demonstrate the function’s worth. For example, Investment Recovery Association member statistics reflect that IR professionals have saved individual companies as much as $150 million in only one year, and that it would take $20 in new sales to match the net profit generated by just $1 of IR activity. Business leaders understand these kinds of statistics, and Michael Porter’s value chain model and analysis can help you identify where and how to quantify the IR team’s benefits. Leverage the ideas generated by the value chain analysis by establishing relationships that deliver benefits to various groups based on the synergies that investment recovery teams are uniquely qualified to see. If necessary, establish a regular meeting that includes all the groups in your organization to ensure they are contributing equally to this vision. If you don’t have an enterprise resource planning system, or if your existing system does not include the applications necessary to facilitate these kinds of exchanges, work with your IT colleagues to implement that functionality as part of the ERP system or as a standalone solution.
As an example of possible synergies, IR managers should consider the following: The administrative services executive has hundreds of obsolete PCs, which may be serviceable for other needs within your organization. Remote operations may be able to use the PCs for email and intranet communications with headquarters, improving efficiency, responsiveness and morale. Research and development teams may be able to unite multiple PCs into a virtual supercomputer with grid software, eliminating a significant cost or accelerating productivity. Environmental health and safety may be able to use the computers to monitor discharge processes, inexpensively complying with state and federal regulations. Community relations may be able to contribute the PCs to a local school, library
or civic organization, creating goodwill and improving the company’s image, while also creating a tax advantage. All of these new purposes have an easily quantifiable impact on the company’s value chain. All of them are at the bottom of the administrative executive’s priority list and all of them are uniquely visible to the IR team.
For each success of this kind, formally observe the win with your team. Develop tangible representation to help communicate the benefits they created. For example, you may have a clear plastic piggy bank that you fill with a piece of gold foil-wrapped candy for each $1,000 dollars you save or generate. Make sure the rapidly filling bank is clearly visible to everyone in the company. When one is full, start filling another one and celebrate at the end of each year by distributing the candy to the group you’ve worked with most successfully. You can replicate a virtual piggy bank on the company’s intranet site, or set up a Web camera to show the progress as it becomes full. Make sure your statistics are clearly delineated in the regular financial reports, and participate in the company’s strategic planning and goal-setting meetings so IR results and goals achieve the same status as sales and revenue numbers.
With conscious and regular outreach of this kind, the investment recovery team will improve the organization’s value chain with revenue increases and cost decreases. It will consequently prove its worth to the organization and will be perceived as an expert resource with broad visibility into multiple aspects of the company’s primary and support activities.