We will start jogging: Trim flab, focus on efficiencies

Now doesn’t that really sound like a New Year resolution? Haven’t we made this resolution so many times in the past —and well past our teenage years? Now, it seems this can become a do-or-die resolution for corporate India. Sunil Chandiramani of E&Y says this is a clear and classic resolution and it is a must for survival. “Lose weight, be fit. We have been living and working in prosperous times with rapid growth. We have collected flab and this is the time to shed all that, be it processes or be it people.”

Prescription for efficiency Revaluate all contracts Relook at cost structures and models Bring in efficiencies in processes Get rid of excess and over engineered systems Improve productivity of people

So the new focus on costs will keep companies running this year—or else they will not survive. The first step in that endeavor is to cut costs—the right ones. Richard Rekhy, COO, KPMG India says: “Saving costs is a pertinent issue, but the mistake many organisations make is to cut indiscriminately.

For instance, they might put training programmes and branding initiatives on hold. Be cost-conscious but do not cut back on vital processes that can hinder the growth of the organisation in the long run.” Rekhy further adds that companies can do well by focussing on their core business. “Get back to the core functions in the business. Get rid of non-core businesses and concentrate on areas where a company’s skill lie,” he says. These comments again bring Satyam’s aborted twin acquisitions to mind, which were in a totally unrelated area (not counting, of course, the blood relations between the promoters).

Better working capital management is another way to manage costs as is managing one’s interest burdens. The entire loan portfolio can be looked into for opportunities to reduce the burden.

In December, two senior McKinsey partners Alexander Niemeyer and Bruce Simpson wrote in an article: “Many companies can drastically cut capital spending. The best way to do this is not to impose artificial cut-offs but to assemble the relevant, knowledgeable parties to look for ways of postponing or reducing capital project spending and to exploit the current willingness of major project suppliers to renegotiate prices.” To put it simply, keep a check on your costs.