30 April 2007

Cutting costs

A good pal of mine says that "Any fool can cut costs, it's reducing the cost base without reducing organisational capability that's the tricky part." That's been brought home to me during the last few weeks as I've been doing an operational review for a fairly large sized organisation which has been through a series of cost reduction exercises over the last 5 years.

What I have been doing is to establish the organisation's current capability in a number of dimensions and the answers have been occasionally bleak. Some of these cost reduction exercises have limited the organisation's ability to create value which has created a rather damaging spiral of decline.

The moral: think hard and make sure that it's just costs that you are cutting.

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