Companies were able to cut costs effectively through the crisis, executives say, but they’re less confident 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 significant cutbacks in overall costs since the onset of the economic downturn in September 2008, according to a recent McKinsey survey. Even though cost containment remains a high priority, many respondents worry about the sustainability of the cost reductions and are only somewhat confident that their companies are adequately prepared for even bigger cost challenges, which they expect in the coming year. These are among the findings of a survey of 300 operations and other senior executives from around the world. They (McKinsey) 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. They also asked respondents to identify the most significant risks facing their companies’ cost structures in the coming year and assess their confidence in the level of preparedness of their organizations to manage those risks.
While the results reflect 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.
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