Working at a large company, I frequently read and hear about the next initiative coming down the pipe to reduce costs, but rarely do those efforts create lasting change.  We improve in the short term most likely as a result of the Hawthorne Effect, but the control measures used to lock in the change are either inadequate or not monitored to ensure compliance.

In this article, McKinsey & Company offers 5 tips to making cost cuts stick (it is also available in a podcast).  Each suggestion is backed up with data and experience demonstrating the effectiveness or lack thereof in creating lasting change.  The one that hit home for me was to “Clearly articulate the link between cost management and strategy.”  The article reads, “the goal cannot be merely to meet a bottom-line target,” but that is frequently what our company does.  I like how the article points out that it might not be wise to starve a business unit that is a shining star in need of resources for the purpose of simply meeting a savings goal.

As a business leader, I believe we should concentrate on what changes our business needs to be competitive in the market place, and not the attainment of some arbitrary savings target.