Using competition with vendors to motivate cost savings

Topics: Administration and Finance, Budgeting, Cost Savings, Vendor Negotiation, Procurement

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John Workman John Workman, Practice Manager

One of the most powerful cost savings strategies institutions can pursue is to directly incentivize units. Because the most effective tactics for controlling costs are often unit-specific and must come from unit staff who best understand existing processes and inefficiencies, meaningful incentives can spur unit leaders and staff to actively seek out savings rather than simply managing the budget.

The most common types of incentives are financial—such as gainsharing programs that allow units to retain a portion of saved dollars or performance pay for unit leaders that link savings targets to merit pay or bonuses.