Think your way through to cost reduction – don’t just cut

“We could tell it was going to be a difficult year from early on.  Our sales
figures did not reach expectations from month 1 and because our cost base was very fixed, our profitability was taking a real hammering. Significant cost reduction measures were required and there was a real  concern that cutting by using a standard percentage across the board might do long-term damage to the business. We might end up severing arteries and not just cutting out fat.”

“The decision was made to proceed with a proper strategic review using a project team and to declare this to the business. Of course this was risky – potentially it could be putting the whole business on edge while the project was running.  The team consisted of respected senior managers from across the business and they drew data and inputs in from all departments, provided regular reviews to the business executive and feedback to meetings of their peers.”

“The proposals which the team recommended to the business executive were based on restructuring the manufacturing elements of the organisation – the accepted plans involved simplifying the management structure, outsourcing non-core component and product manufacture and reducing the number of manufacturing facilities.  There were reductions accepted in other areas but this was the core of the proposal.”

“Because the ideas were based on rational proposals, they could be openly communicated.  The implementation was carefully planned and whilst painful was successfully completed.  In fact these strategic ideas became the foundation for further improvements over later years.”

“We came to realise that our previous fair approach to cost reduction based on everyone taking an equal share of the pain was in danger of leading us to become an unviable business.  Taking a proper rational and strategic look, albeit painful and challenging, secured the long term viability of the business”.

Andrew Kearns

Hartswood Management Ltd

Removing the roadblocks to delivering real improvement


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