Short term outlook rather than strategic says survey

An independent global survey conducted in February this year shows that businesses are guilty of not practising what they preach when it comes to managing business costs in an uncertain economic climate. The research, undertaken by Arnold & Bolingbroke on behalf of consultancy firm PWC, suggests that companies are making short term cuts to appease their shareholders rather than considering longer term strategies to grow the business. Announcing the results of the survey at last month’s E-World Manufacturing & Production conference, Brian Pomering, director at PWC commented: “If companies are not careful, they’ll not be geared up to benefit from an upturn… There’s too much cost-cutting going on and it means firms will be under-resourced to meet future opportunities when things get better.” The survey was based on 600 interviews with senior executives (CFO or equivalent) across six industry sectors: manufacturing, financial, FMCG, retail, IT & telecoms in Europe, the Americas, Africa and Australia. Company turnover ranged from $50m up to $5bn. “Confronted by economic uncertainty, managers worldwide will all too readily resort to slash-and-burn cost-cutting, instead of approaching cost control strategically for the longer term,” added Pomering. But cuts like these can have a damaging effect on the workforce. As Pomering explained: “86% of respondents agreed that significant short term cost reduction programmes can be strongly detrimental to staff morale and loyalty… And 55% agreed that obvious cost cutting is more about impressing analysts and shareholders than improving the business. But knowing this does not stop most [of them] from making the same short-term cuts they know to be damaging to the longer-term prospects of the business. As far as IT is concerned, Pomering suggested businesses were, “Ignoring the substantial cost control benefits that e-technology can deliver,” and that, “By moving procurement from a disintegrated, back-office manual function to a co-ordinated set of processes supported by appropriate technology and web-enabled electronic process,” companies could save on expenses and gain time. “Quick-fix cost reductions dominates the global agenda with 60% of companies putting recruitment and investment on hold. Many firms do not appear to have learned lessons of the early 1990s, and seem intent on making sure history repeats itself,” added Pomering. According to Pomering, chaos theory has now become business reality. “There’s a clear 50/50 split in the number of respondents who said their company was operating in a downturn environment. Our research shows that across industries and geographies there is no clear view of the market or set pattern to attitudes.”