Don’t call CEO cost cutting plans ‘negative’ or ‘defensive’
Mar 02, 2020
PwC’s 23rd CEO Survey has revealed that in the face of economic uncertainty, CEOs are adopting a combination of practical measures. They’re looking for operational efficiencies, which makes sense. And they are also looking to launch new products and services, and explore new markets for growth. These also sound like smart moves.
But it would be wrong to assume the former is purely a defensive measure, compared to the bolder, braver positivity of those product launches or international expansion.
- 79% of UK CEOs plan to implement operational efficiencies this year
- 65% plan to launch a new product or service
- 42% are exploring a new market
(source: PwC’s 23rd CEO Survey)
We need to move beyond the simplistic assessment of cutting costs as a defensive measure in challenging times. Cost cutting and operational efficiencies are inextricably linked to an organisation’s ability to grow and capitalise on opportunity by freeing up resources and focusing investment and energy in the right places.
As such, I’m slightly surprised only 79% of UK CEOs said they would be addressing operational efficiencies this year.
Of course, there will be some businesses who are simply cutting costs wherever possible just to save money. Though Colin Lewis, CEO of Avant Homes, summed up the potential risks of taking that approach too far when he said: “Whatever you do, don’t batten down the hatches so tight that you can’t see out, because you won’t see opportunities either.”
But no business, no matter how confident it is, should be chasing opportunities without an eye on cost and efficiency across their whole business and how they can better achieve their strategic goals through more effective management and allocation of resources.
Businesses are changing all the time. Pushed and pulled by economics, politics, emerging technologies and changing customer behaviours and demands. And as they change, and become more adept at changing, they need to ensure their agility is not pulling them out of shape. It’s easy to characterise agility as the ability to quickly invest in and implement new ideas and ways of working. But it’s a lot easier to be agile when you’re not weighed down by unnecessary baggage.
All the businesses we speak to about cost-based transformation understand this. And that is why we shouldn’t presume for one minute that plans to address operational efficiencies are a sign of caution, any more than they might be a sign of an organisation planning aggressive investments in other areas of their business.