Cost Reduction Management
Virtually every executive on virtually all levels and across all industries and business sizes, have to deal with budgeting and cost efficiencies. One would be hard pressed to find any executive that is not attempting to reduce cost to increase profitability. However, considering the role of modern management coupled with technological development in the most recent two decades, one may wonder about the effectiveness of executive times to re-negotiate or find alternative solutions.
That being said, the sheer mention of the value of executive efforts and cost cutting in the same sentence may make the stakeholders rather nervous. Such concerns can be easily addressed by simple cost benefit analysis. In our experiences, the outcome is virtually always the same; the cost of having high level executives deal with cost saving daily tasks exceeds the benefits of those cost savings .
The most suitable solution lies within outsourcing . In our experiences we have found that a pay per performance model in this particular case is the most beneficial approach. Once a third party is chosen, the compensation could include a minimal base payment combined with a percentage of cost saving. Yet such agreement requires that virtually all contracts and agreements of the given organization is up for analysis and improvement .
Ultimately, cost saving and cost reduction management should be a vital part of overall strategic management. Yet the methodology and approach to such measures requires extensive cost benefit analysis in order to maximize the outcome which can be beneficial to all stakeholders.
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