Academic journal article Manager

Law Firm Advises Managers on Reducing Costs

Academic journal article Manager

Law Firm Advises Managers on Reducing Costs

Article excerpt

In these challenging times, when managers in organisations of all sizes are examining every aspect of expenditure, a Scottish law firm has provided 'manager' with a series of golden rules for cost reduction.

Donald Forsyth, Commercial Partner of Scott-Moncrieff, which is based in Edinburgh and Glasgow, UK, has urged managers to lead cost reduction exercises from the very top of the business and to consider the interaction between a business's financial strategy and its commercial strategy. Says Mr Forsyth, "If the two are pulling in different directions, cost reductions can backfire."

His tips on the most important rules of cost reduction include the following advice and considerations:

1. Random cost reduction is dangerous: it can damage customer relations, harm employee morale, create conflict and inhibit the achievement of strategic goals.

2. Cost reductions must be sustainable and not be just 'window dressing'. Don't blindly slash budget categories, such as training or marketing, nor carry out cost cutting based on budget variances, without considering what the underlying activity actually represents.

For example, if increased marketing spend will deliver more profitable sales, then over-spending on marketing in comparison to the original budget is sensible. To take another instance, under-spending on health and safety may look good on paper - until there's an accident!

3. Use reporting and management tools to make sure that target cost reductions actually happen. …

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