Cost Cutting in past and next(2)

Cost Cutting in past and next(2) - McKinsey Global Survey...

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Companies were able to cut costs effectively through the crisis, executives say, but they’re less confdent oF their ability to contain or continue to cut them. Some companies are positioning themselves For longer-term success by planning the next round more strategically. Executives say their companies have made effective and signiFcant cutbacks in overall costs since the onset of the economic downturn in September 2008, according to a recent McKinsey survey. 1 Even though cost containment remains a high priority, many respondents worry about the sustainability of the cost reductions and are only somewhat conFdent that their companies are adequately prepared for even bigger cost challenges, which they expect in the coming year. These are among the Fndings of a survey of 300 operations and other senior executives from around the world. We asked respondents about the size and scope of recent actions their organizations have taken to reduce costs, the strategic motivations underpinning the moves, and executives’ views on the success and sustainability of cost cuts. We also asked respondents to identify the most signiFcant risks facing their companies’ cost structures in the coming year and assess their conFdence in the level of preparedness of their organizations to manage those risks. While the results re±ect a lingering environment of uncertainty and risk in the short term, they also show that some companies are making important strategic moves in cost reduction—among them, a focus on organizational effectiveness and capability building—to position themselves advantageously for the long haul. 1 The online survey was in the Feld in November 2009 and received responses from 301 executives from a full range of industries and regions; 72 are operations executives, and the remainder are senior executives with other functional specialties. Jean-François Martin What worked in cost cutting— and what’s next McKinsey Global Survey results:
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2 What worked in cost cutting—and what’s next McKinsey Global Survey results A hard look at the bottom line Even as moderate optimism about the global economy returns, 2 cost cutting remains a top priority for nearly three-quarters of all respondents to this survey. More than half say their companies have cut up to 10 percent of overall costs since September 2008, nearly one-third say their companies have reduced costs by 11 percent to 20 percent, and 9 percent of executives report cutbacks of 20 percent or more. More than half of all respondents say the cost-cutting programs undertaken by their companies since September 2008 were targeted at labor, with overhead labor accounting for the lion’s share of labor cost reductions. Forty percent of executives say they cut costs in all categories: frontline and overhead labor, nonlabor, and capital assets (Exhibit 1). Exhibit 1
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This note was uploaded on 11/22/2011 for the course BUS 401 taught by Professor Terrywilson during the Spring '11 term at Solano Community College.

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Cost Cutting in past and next(2) - McKinsey Global Survey...

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