Andrew Hone shares a company post that identifies essential tips for cutting business costs.
Although cost reduction programs can deliver a powerful mix of financial, strategic, and organisational benefits, the failure rates of these types of programs are very high.
A recent survey of C-Suite executives, for example, found that while 90% of businesses had attempted to implement a cost reduction program, 75% failed to meet their targets, and 44% missed them by more than half.
Drawing on some of the key insights from our new report, the Agile Cost Advantage, in this article we consider how you can ensure the success of your own cost cutting program.
At Zenith, we have spent over twenty years supporting businesses to deliver cost cutting programs.
In some cases, they have already attempted a cost cutting program, but it didn’t quite get the benefits they were hoping for. In other cases, they have already tried engaging one of our better known competitors, only to be faced with a big bill and a disappointing outcome.
We decided to go back and look at what it was that made some cost reduction programs succeed where others fail.
As we looked at this in more detail, we found that successful programs typically shared a number of features in common.
- Create a burning platform
Cost reduction programs can be hard. It means changing the way people do things. In some cases, it might mean cutting back on staff.
If you’re going to ask your management team to come with you on this journey, they need a good reason to do it.
That means creating a burning platform so your team understands the need for the cost reduction program.
Sometimes the burning platform might be an existential threat (e.g. your revenue is falling, and if you don’t cut your costs, you won’t be in business).
Sometimes a cost restructuring could be a way of funding new investment, creating new growth opportunities for the workforce.
Whatever the burning platform is, by communicating it clearly at the start of the process, you can bring your teams with you.
They still might not like some of the sacrifices they are being asked to make, but at least they will understand why they are making them.
Key points include:
- Team collaboration
- Building early momentum
- Developing a clear project plan
Read the full paper, 10 essential tips for cutting business costs, on ZenithStrategy.com.