How the most resilient companies position themselves to grow
From the Magazine (July–August 2023) · Long read
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Spotlight Series/The Right Way to Cut Costs
Summary. When so much in the world feels beyond our control, costs are to a large extent controllable. But cutting them to drive short-term savings is a mistake. When companies take a one-off approach to cost cutting, they often sacrifice some of their most important investments. If cost-cutting programs are implemented in haste, little (if any) debate over the strategic intent of investments takes place. To the contrary, leaders typically dole out across-the-board targets, leaving organizations weaker, imbalanced, disjointed, and in some cases desperate and without direction. In this article the authors identify five keys to ensuring that companies build an efficient, effective culture around costs that works in both good times and bad.
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In times of economic uncertainty, many leaders turn to an old standby: cost cutting. When so much in the world feels beyond our control, costs are, to a large extent, controllable. But cutting costs with the singular goal of realizing short-term savings is myopic. Whether they’re faced with an urgent need or not, leaders should view each expense line as a precious investment in the business—and recognize how the decision to increase, decrease, or maintain it will shape the company’s future.
A version of this article appeared in the July–August 2023 issue of Harvard Business Review.
Read more on Finance and investing or related topic Automation
Vinay Couto is a vice-chair of Strategy&, PwC’s strategy consulting business. He is a coauthor of Fit for Growth: A Guide to Strategic Cost Cutting, Restructuring, and Renewal.
Paul Leinwand is a principal at PwC U.S., a global managing director at Strategy&, and an adjunct professor at Northwestern’s Kellogg School. He is a coauthor, with Mahadeva Matt Mani, of Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future (HBR Press, 2022).
Sundar Subramanian is a principal at PwC U.S., and leads Strategy&, PwC’s strategy consulting business. He also heads its enterprise strategy, value, and digital transformation practice.
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Spotlight Series/The Right Way to Cut Costs
Read more on Finance and investing or related topic Automation