The whiplash of the economic downturn made cost cutting absolutely imperative for companies across the globe. Cost reduction was a natural corollary to lower demand for products and services. However, a McKinsey survey of executives across a range of industries and regions reveals that companies have also made important strategic moves in cost reduction to wrest a long-term advantage over competition.
CUTS EVERYWHERE
— A McKinsey survey of global executives |
Clearly, for strategic sourcing and lean to work, concomitant cultural changes and long-term organisational commitment are required. Not surprisingly then, 57 per cent of all executives say their companies will focus on organisational effectiveness, including talent and capability building, as an operational priority in the coming months. Indeed, 21 per cent of respondents have "frontline talent and culture" as the single area where improvement will fundamentally lower their companies' cost structures. Interestingly, executives who describe their companies' past approach to cost cutting as both targeted and sustainable were far more likely to focus on organisational effectiveness than others—perhaps an indication that they may be in a position to further extend their cost advantages.
WHY CUT?
Factors that motivated cost cutting.