Transcript
Page 1: Are You Addicted to Cost Cutting?

Are You Addicted toCost Cutting?

Page 2: Are You Addicted to Cost Cutting?

Competition – Technology – Change - Customer• We reside in a state of flux• Forces out there drive us to be better – more efficient,

more profitable, more customer-centric, better corporate citizen, better rating by investors• We continue to strive to better ourselves• It is a journey and we need to keep moving

Page 3: Are You Addicted to Cost Cutting?

How are firms managing costs?

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Page 4: Are You Addicted to Cost Cutting?

What are they considering next?

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Page 5: Are You Addicted to Cost Cutting?

Cost Cutting• Part of life• Seen as a logical consequence of

macroeconomic factors• It helps the business bottom line in the

short run

• We do not cut costs because we feel we had been reckless in spending it. But that means, cutting costs would lead to projects getting starved and growth drying up

Page 6: Are You Addicted to Cost Cutting?

Consequences of Cost Cutting• Heads roll• It hampers the core activities• It is not possible to keep the costs low• Since most firms cut costs when in dire straits, they

make lousy decisions• Companies suffer in the long run

Page 7: Are You Addicted to Cost Cutting?

And Yet...• The ability to keep cost low is a competitive

advantage• Some firms are able to do it effectively and

sustainably

Page 8: Are You Addicted to Cost Cutting?

• Ad hoc• Cost cutting hurts• Not sustainable• Not a win-win situation• Never welcomed• Shows lack of preparation and inadequacy• Hurts the business

Cost Cutting Versus Strategic Cost Management

• Aligned to overall corporate objectives• Proactive• Sustainable• Win-win situation• Helps the business

Page 9: Are You Addicted to Cost Cutting?

• Starts with a zero – questions every assumption• Provides greater transparency and accountability• By taking costs out of the business, you make the

business processes efficient• The business becomes more productive, where they

spend less and get more done• All the while, more cash flow to the bottom line

Strategic Cost Management

Page 10: Are You Addicted to Cost Cutting?

• Put one in place before you need it• Cross functional team• Proper scale for comparison• Get the buy-in of the front-line• It is a change in mindset – a culture that needs

nurturing

Strategic Cost Management

Page 11: Are You Addicted to Cost Cutting?

Costs are a consequence of what you do, so don’t let them control you – it should be the other way around.

Page 12: Are You Addicted to Cost Cutting?

• We do not believe in cost cutting

How ERA works

Analysis Opportunity

Implement Review

Page 13: Are You Addicted to Cost Cutting?

Moving Forward• Break out of silos where costs of

particular departments, category or projects are scrutinised• Take a step back, and consider

how activities span different departments and costs are incurred• Consider the processes• Analyse them• Simplify/Uncomplicate them

Page 14: Are You Addicted to Cost Cutting?

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