American companies cut more than 200,000 jobs in the third quarter in a bid to reduce expenses and restructure, according to data compiled by executive outplacement firm Challenger, Gray & Christmas. But a new study from Accenture has found that most corporations are failing to align growth and cost reduction strategies.
The global technology consulting and services group surveyed 682 senior executives (more than half of whom were C-level) across 13 industries for its study titled, “Increasing Agility to Fuel Growth and Competitiveness” and found that while 82 percent of respondents want to free up funds to invest in growth, just 21 percent feel confident that their leadership has the right initiatives in place to reach cost-reduction targets.
In fact, only 23 percent of business leaders said their company consistently pinpoints and stops superfluous business activities and, as a result, less than one third said the reinvestment of cost savings support their strategy. Moreover, just 24 percent believe their company has the flexible operating model it needs to focus on activities that result in growth and profitability.
“A company should directly integrate its cost reduction strategy with how savings are reinvested in order to achieve sustainable growth,” Kris Timmermans, senior managing director for operations at Accenture Strategy. “As our study shows, many companies are falling short. To avoid cost cutting becoming an end in itself, management needs to know from the outset what contributes to their company’s growth, what does not and where to reinvest savings.”
But even before that can happen, chief executives and chief financial officers need to have a better dialog. The study found that 51 percent of CEOs believe that their business spotlights and assigns resources to activities that drive value for the organization. Only 34 percent of CFOs agreed with that statement.
Plus, 20 percent of CEOs admitted that reinvestment priorities are driven by the quick buck, compared to 30 percent of CFOs.
However, the majority agreed that investment in digital is the way to go, with more than 54 percent putting money into it and 61 percent saying that upping their use of technology would enable their operating model to work at half its base cost. Furthermore, 85 percent described the digital business as “an enabler of strategic growth.”
“The study demonstrates that digital business strategies play an important role in helping companies gain much needed flexibility and market responsiveness, but that senior leaders need to be more aligned around their business strategy and cost management efforts first if they are to achieve sustainable growth,” Donniel Schulman, senior managing director at Accenture Products, said. “To succeed, companies need to use and monetize available data, build digital intelligence, organize for speed, accelerate innovation and digitize traditional business functions and capabilities.”
Respondents worked in such industries as retail, consumer goods and banking, to name a few, and were located throughout North America, Europe, Southeast Asia and Brazil.