Cost Reduction Programs Fail Big Time
August 22, 2010
Ah, gentle reader, you know that I think blue-chip consultants are playing 3-D chess whilst the azurini (the second and third tier consultants) are playing checkers. However, the blue chip outfits can make some big mistakes. Anyone remember International Harvester? The excitement over Guinness? Meh.
The addled goose was surprised with certain statements in “McKinsey Says 90 Percent of Cost Reduction Programs Fail” that suggest that most cost reduction programs fall short. According to the article they describe cost-reduction programs as “illusionary and short lived and at times damaging to long term value creation.” They then release the staggering statistic that “90% of cost reduction programs fail. McKinsey then goes on to explain the fundamentals needed for sustainable business improvement.
However, McKinsey’s statement fails to mention the fact that regardless of the industry especially during the current recession many companies are finding it increasingly difficult to control their overall costs. Companies are focusing more attention on instituting programs and guidelines that help cut costs but it’s a constant battle. Industry leaders such as IGear make this easier for clients because they offer quality monitoring services that offer additional benefits such as cost reduction and cost control. This encourages economic growth and stability and demonstrates that there are always two sides to every story.
The other point not addressed is that McKinsey provides this type of consulting advice. How many of McKinsey’s clients fail in those cost cutting programs? Perhaps McKinsey is so good that the 10 percent success rate is attributable to McKinsey’s work? What about those hefty consulting fees? Do they count in cost cutting?
In a lousy economic climate, I believe that the blue-chips can make noises just like the azurini. The goose is delighted to be on the sidelines when these folks make claims and counter claims. Observing the silliness is more fun that watching the goslings in a race across the mud flats.
Stephen E Arnold, August 22, 2010
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