“Spend Less, but Grow More” is Easier Said Than Done as Companies Struggle to Balance Cost Management with Growth Plans

Just when America’s largest businesses thought they had solved the cost reduction-growth conundrum brought on by the Great Recession, many organizations continue to face a challenging paradox – grow more, spend less -- according to findings in Deloitte’s enterprise cost reduction survey.

The survey, which gauges the cost reduction and management practices of 139 executives in the United States from Fortune 1000 companies, reveals that 90 percent of respondents expect their company’s revenues to grow in the next two years – but 80 percent are likely to undertake cost improvement initiatives during the same timeframe.

The survey shows that over the next 24 months, 61 percent of respondents said their companies will look to cut costs in a few divisions, business units, functions or geographies through methods such as asset sales, IT cost reduction or divestiture. One-half of all surveyed respondents plan to intensify existing productivity improvement programs, such as six sigma and lean operations, to further reduce costs, while 35 percent plan to drive all divisions, business units and corporate functions to reduce a fixed percent of their costs. In addition, 54 percent of respondents expect to reduce costs by establishing targets in excess of 10 percent during the next two years.

Looking back at how organizations increased their cost-management capabilities during the past 24 months, respondents reported implementing new policies and procedures to strengthen compliance mechanisms (73 percent), improving forecasting, budgeting and reporting processes for effective cost management (67 percent), setting-up IT infrastructure, systems and business intelligence platforms to refine the collection and reporting of cost data (26 percent) and creating a new internal position to drive cost management (17 percent). However, some of these cost reduction efforts fell short, as 36 percent of the respondents reported that they were unable to meet their annual cost reduction targets.

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