Paying The Price For Bad Management?

By KHALIDA YOUSUF | INNLIVE

A survey by leading UK-based consultancy Auditel has found that 70 per cent of organisations do not have a cost management strategy in place.

The consultancy surveyed 120 business leaders worldwide and less than two per cent of them claim to track costs, or have an on-going programme to do that.

“Most organisations do not have the sophisticated analytical tools to benchmark costs accurately and monitor them after implementing cost savings,” says Chris Allison, Auditel’s managing director.

A recent KMPG survey showed that 95 per cent of cost reduction exercises fail and costs come flooding back.

Allison says cost management is not all about cost-cutting, contrary to what many organisations believe.

“Auditel commissioned this survey as we were keen to see how cost management is viewed in today’s economic environment. The answers have revealed that businesses and organisations did not embrace strategic cost management as well as they might have done. There is a genuine lack of understanding between simple cost cutting exercises and strategic cost management,” remarks Allison.

When it comes to the Middle East region, Khaled Al Mansoori, CEO of Abu Dhabi-listed Emirates Driving Company, says the first step that every company leader is thinking about is how to cut costs, even if they are doing relatively well; they focus on reducing expenses to make sure they are well prepared for future fears.

In a special report, titled 7 Strategies to Survive the Rest of 2016, Al Mansoori writes: “To reduce expenses for the long term and lead the way to recovery, start by taking a strategic view of the company’s capabilities, priorities and its future potential, without taking the risk of making the company weaker.”

When asked what should be the best strategy in terms of cost optimisation for businesses across industries, MR Raghu, managing director of Marmore MENA Intelligence, which specialises on economic and capital market research, said: “On a general level, driving out process inefficiencies would result in cost optimisation.”

“This could be done through various channels such as better working capital management, strategic sourcing and removing supply-chain inefficiencies. For instance, consolidation of suppliers (resulting in better purchasing terms) and better inventory management techniques, such as just-in-time, could lead to substantial cost savings,” Raghu states in the special report.

The report serves as a survival guide for businesses operating in the region, highlighting the main areas they need to focus on to survive and thrive during the rest of the year and beyond.

The seven strategies explored in the report are: Innovation, Diversification, Collaboration, Optimisation, Transparency, Talent Management and Agility. These survival tips are further strengthened through insights from the MENA region’s leading business players, thinkers and analysts.