Cost Control: A Strategic Guide (CIMA Professional Handbook) - Softcover

Doyle, David

Softcover

ISBN 10: 1859715176 ISBN 13: 9781859715178

Publisher: Chartered Institute of Management Accountants, 2002

Synopsis

The current economic climate has meant that cost control is firmly back on the corporate agenda. This edition maintains that all too often, costs are cut in a way that is actually detrimental to the company in the short and long-term. The author highlights and examines the many pitfalls managers face, and suggests a more flexible model which will offer stability and sustainability in the modern global marketplace. Getting maximum results out of organisational resources while minimising costs will continue to rank as one of the main strategic issues facing managers for many generations to come. Key points and a checklist are included at the end of every chapter. It highlights and examines the many pitfalls managers face in the current economic climate. The author is a cost management and marketing expert and lectures in management control at the HEC School of Management.

About this title

From the Author

My book suggests that after years of cost-cutting, restructuring and rationalisation, the corporate agenda moved, for a time, beyond this concern in pursuit of a quest for innovation. A large part of the rationale was the recognition that improved cost-efficiency was no substitute for top-line revenue growth. Contributing to this transformation was the frantic pace of innovation, encouraged by the dotcom phenomena, following an accelerated shorter-life cycle for many products, deregulation of markets and increased global competition.

Even the most successful of companies are reaching the conclusion that incremental changes to strategy and internal systems were probably not big enough to make a differences if they worked; if they failed, vital resources were sapped. Consultants are also quick to point out that, in any event, many companies let costs get out of hand during the expansionist era of the late 1990's.

The thrust of my book is to propose that cost control be re-instated on the corporate agenda - and remain a permanent component of discussion at both board and non-executive director level. The strategic agenda focused on restructuring for many companies is probably unfinished. When the next cyclical cost cutting phase is behind us, the real challenge will remain one of finding a model that ensures that resources are focused on businesses that the company does best, and not on chasing marginal activities, at a level of cost that is both measurable and manageable.

The ultimate goal in tackling the corporate cost phenomena is to divert the attention of senior management away from wielding the hatchet and encourage them instead to focus their interpersonal and leadership skills on freeing up the managers' time and effort the trivia and ephemera of daily corporate life. The focus should be on concentrating effort and expertise on the key drivers of the business that will contribute to improving performance. My book proposes a revised culture towards cost control, based on a more strategic perspective. In short, corporate heads need to abandon the insular, constraining framework of the annual budget cycle, and indiscriminate downsizing, to:

1. examine different approaches to cost containment that go beyond downsizing to appraise activities from a value-added/cost-containment perspective aimed at modifying the manner in which they produce, report, supervise, control, appraise and market products or other offerings;

2. identify means to eliminate or minimise unnecessary or low value-added tasks and activities, on the premise that activities create overheads but reducing overheads does not necessarily eliminate the activity itself.

Cost Control - A Strategic Guide, inspired by documented research and extensive corporate cases, draws the following conclusions:

*Company leaders are questioning whether a corporate strategy based on size and scale in places around the globe is sustainable and cost effective.

* Corporate structures and hierarchical reporting systems need to be fine-tuned and evolve with the external global conditions.

* Repeated and indiscriminate cost-cutting is ultimately detrimental to corporate health, especially if highly-skilled people leave.

* Internal controls and fraud-detection can be under-minded by constant cuts in headcount at middle-management level.

* Corporations need to constantly examine their working patterns, information flows and staff behaviour that lead to the high costs in the first instance.

* Direct labour is a declining factor of total organisational costs. Support manufacturing and marketing costs are growing three times faster, but are poorly understood and measured, leading to indiscriminate cost allocations across all product lines.

* Where do IT applications used by the company fit into the traditional cost structures of labour, raw materials and overheads? Can IT be measured as a stand-alone activity or as an integral part of other responsibility centres?

* Inaccurate, irrelevant and misleading information will arise where companies produce multiple products produced in different volumes and with varying levels of complexity, based on traditional costing techniques: impaired decision-making and dysfunctional resource allocation will result.

* Striving to achieve sales growth that justifies the company's existing cost base may be unrealistic in today's conditions.

* Few companies today can afford the luxury of considering everyone as an existing or potential customer. As with any asset, rigorous analysis must be deployed to ensure that an adequate return on investment is derived from activities devoted to the acquisition, development and retention of customers.

* D. Doyle

Edition details

• Publisher: Chartered Institute of Management Accountants
• Publication date: 2002
• Language: English
• ISBN 10: 1859715176
• ISBN 13: 9781859715178
• Binding: Paperback
• Edition number: 2
• Number of pages: 220