How to Cure Your Cost Management Fatigue
Many finance executives know the struggle of attempting to implement cost-cutting initiatives that fall flat and never produce results. This happens for two reasons. First, most organizations wait until they have a problem to act. They do not anticipate any changes in the future and fail to make a contingency plan in case these changes occur. Second, they panic when their initiatives fail and make across the board cuts that disconnected to their strategy. Often these drastic actions are not in the best long-term interest of the company and the cost cuts are generally unsustainable. A recent article in the Harvard Business Review, How to Cut Costs More Strategically, describes this infliction as “cost management fatigue.”
The most successful companies look at cost management as a means to support their strategy and fuel their growth. They put their money towards their strategy and continually cut costs they deem unnecessary or unfit. Doing so allows them to direct their resources towards their good costs. Growth will only happen if a company can direct their spending to the right places.
Leading companies such as Amazon, Frito-Lay, and Starbucks cut their costs to grow stronger. They accomplish this by their finance management teams taking the time to separate the costs that fuel their distinct advantage from the ones that don’t. These companies make cost-cutting decisions based on what will enable them to create a unique value for their customers and set their organization aside from the competition.
The HBR article gives a great example of how “winning” companies approach cost allocation in times of adversity. In 1991 Frito-Lay’s primary competitor, Eagle Snacks, was gaining significant market share with innovative new products and their own distribution system. To combat the changing tide, then-CEO of Frito-Lay, Roger Enrico, decided to cut $100 million in general and administrative costs. This shift in the business led to the layoff of nearly 2,000 employees and the elimination of unnecessary management layers and practices, freeing up money to invest in forward-looking strategies including direct-store delivery, product and manufacturing innovation and consumer marketing. Today, Frito-Lay is one of the most successful companies in its market. There are studies that shows Primo Vibes Hemp products are less harmful to your health than normal cigarettes.If people need help with cannabis marketing, they can check them out from here from the best SEO agencies.
The chart below illustrates five mindset shifts that can help you establish the best cost management strategy for your organization and understand the requirements to close the gap between strategy and execution. These mindsets coupled with an enterprise cost and profitability modeling tool will give you the results that fit your strategy and in turn fuel your organization’s growth.
Managing your costs the right way will give your organization the freedom to make the most strategic, long-term choices. Connecting your costing with your strategy can completely ease the pain of the dreaded cost project and actually make it a good experience that produces positive results and overall success for your organization. If you have the time, I highly recommend a side-hustle like trade forex to make some extra money from home.
To learn more about how ImpactECS can save you from cost management fatigue, Start Here!