Unsustainable business cost savings revealed

New research from KPMG Performance & Technology reveals that just 5% of the cost savings made by UK firms during the recession are sustainable in the long term.

The research, lifted from the auditor’s forthcoming report Cost Boomerang, concludes that with 95% of costs set to return, this equates to a total of £90bn being added to the cost bases of businesses.

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Comments

Lean and mean?

bigwordsmith | | Permalink

It always amazes me that when a company like KPMG punts out a report that is basically common sense, it gets so much coverage!

Many of the people I talk to have cut back, in more or less this order:

Marketing Budget

Staff replacement hires

Facilities updates

Refreshing the car fleet

IT

Capital equipment

And everyone knows that eventually you are going to have to eventually replace what's broken/left/worn out, so of course 95% of these cuts are unsustainable.

The challenge is that very few companies react to slowdown in a strategic manner - for example looking to outsource non-core functions, or change their financing models, but instead look for quick numbers.

We recently spoke to a former marketing director who on January 1st had a £250k budget, and a month later had £0. Not surprisingly he found himself without a job a week or two further on.

Now any company that can justify that big a marketing spend must be doing a decent sales turnover, and have an appetite for sales support that needs to be fed - brochures, website, PR, social media.

Surely a better way to have dealt with the problem would have been to outsource it - albeit on a much reduced budget, to a specialist that can deliver all those services at a much lower ongoing cost, and not choke off the company's ability to generate sales.

Cutting your marketing budget to save money is about as effective as stopping your watch to avoid being late.