You Can’t Cut Your Way to Growth
Just about every C-level leader talks about how they want to grow their business. But their actions often say something quite different. Frequently cost reduction takes center stage, while actual growth stagnates.
I’m a huge fan of not wasting money on things that don’t add value to a business. And there is plenty of fat to trim if you look strategically. Unfortunately, I see a lot of cost-cutting becoming an end in itself. I met with a leader last month who was spending over $3M in consulting fees this year in an effort to reduce costs. Cue the irony. Senior managers reporting to this leader expressed zero confidence that the savings goal will be achieved. That’s a lot of money to spend on saving, don’t you think?
The truth is, you can’t cut your way to growth. You can eliminate a particular job only once. Cutting non-essential travel is a norm to establish one time. You can only save so much on office supplies and important resources before you erode the effectiveness of your people and your enterprise.
As a leader responsible for the future value of the business, your strategy ought to focus on increasing the top line. Looking at cost-cutting versus growth strategies in purely financial terms, consider the following:
Capital costs are around historic lows. So in terms of financing debt, cash is close to free. So the value of accelerating growth-even over just the next year-is greater than improving margins. Here’s why. With low capital cost, the time value of money is low as well. That means revenue growth has more value to your business in the next year and beyond than the limited dollars you may save in the next quarter.
Investors do not reward top-line stagnation. I’m impressed with what IBM is doing with Watson Analytics. But IBM’s stock price over the last five years is proof that increasing margins by expense reduction is not enough to create value.
While it’s an obvious truth, we tend to forget that the best way to increase the bottom line is to make the top line larger. That won’t happen if you fail to invest in the resources that will enable your growth in favor of cutting costs.
Interested in more on leading revenue growth? Read Scott’s latest report, Sales – Where Strategy Goes to Die.
A Slice of Life Balance
Parents. We love them. And at times they can be such a hassle. But if you have parents who are living, take a moment to let them know how much you love them. You’ve heard this advice before about all loved ones. We know that we should pay more attention to the people who mean so much. But often we need a reminder as we wrangle overscheduled calendars and the ambivalence that exists in many relationships with parents.
So here is my prompt for you: Tell them. In-person. FaceTime. Phone. Text. Whatever. Tell them not only that you love them but what they mean to you, or some of the things you love and appreciate about them.
A couple of weeks ago my mom passed away. I was able to share with her how much I loved her before she died. But in all honesty, I wish I had expressed the depth of those feelings more often. Trust me on this one. Take a few minutes to tell your parents “I love you” in the next couple of days. I promise you won’t regret it.
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