Cost cutting is necessary but not all cost cutting is good. Before taking a scalpel to the income statement, careful planning and consideration of potential consequences should be given to the approach. Then I recommend cutting as deep as necessary to stabilize and save the patient.
“Cutting all parts of a company equally may seem fair, but it doesn’t make sense. Targeted cuts and efforts to build capabilities do. According to a recent McKinsey Quarterly survey, 79 percent of all companies have cut costs in response to the global economic crisis—but only 53 percent of executives think that doing so has helped their companies weather it. Yet organizations continue to cut. Cost reductions often go wrong, we believe, and our experience suggests that they can be done in a better way.” Source: A better way to cut costs – McKinsey Quarterly – Organization – Talent
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