the organization’s leaders actually regarded as more important and where they could havea greater impact. The organization took cost cutting as an opportunity to look intensely at what it did. It decided to stop the extinction-related lobbying and policy activities,undertaken by about 20 percent of its employees, and instead move the work of another20 percent of its staff—along with some of the people undertaking that work—into otherorganizations with suitable mandates. The organization then reinvested a large portion of the savings to increase the number of staff members working on climate change. It also
invested in building the capabilities of its relatively weak HR and nance functions.
When cost cutting in existing functions is appropriate, companies should explore bothradical approaches to restructuring and more traditional tactics, as our recent work with
a professional-services rm shows. For each support activity (such as IT, procurement,and nance), we identied ways to cut costs by working more economically and looked forentirely new ways to deliver support. In ofces—representing almost 10 percent of support
costs—this approach meant considering both a reduction in the amount of space allocatedto each person in the present location and a more radical change to promote work at home
or a hub-and-spoke ofce arrangement, with spokes in much lower-cost locations. In other
1. Restructuring to refect your uture.
When considering each o the areas below, think aboutthe right structure, given the strategy to pursue in themost probable uture; what structural changes to makeregardless o the uture; and specifc events that wouldtrigger structural moves.
Reconsider the core business model and ocus;whether to enter or leave businesses, geographies, or joint ventures; and vertical integration.
Rethink organizational design, including therelationships among the corporate center and thebusiness units.
Resolve unfnished business, such as incompletemerger integration.
Exploring three sources o value
2. Cutting the at.
To determine which o the potential actions below will bemost eective, create an accurate cost baseline, withdetails at the regional and business unit level, and assessthe value o potential costs against that baseline. Setpriorities by assessing each action’s potential value andease o implementation.
Remove layers rom the organization and expandmanagers’ span o control.
Eliminate redundant or irrelevant unctions, processes,or activities.
Apply lean techniques to repeatable or low-valueactivities.
Reconsider the role o the corporate center.
Consolidate activities to gain scale, scope, orknowledge.
Clariy roles across the company to createaccountability; reset pay grades.
Enorce high-productivity standards.
3. Building capabilities.
To determine which capabilities to ocus on, quantitativelyassess the potential gain rom improving them andqualitatively assess the value o greater organizationaleectiveness.
Identiy where the organization is now weak—perhapsbecause complexity is slowing action, the right peoplearen’t in the right places, pivotal roles are weak,perormance scorecards or the business or employeesare ineective, or leaders don’t have time to ocus oncritical tasks.
Determine where stronger capabilities—in unctionssuch as IT, fnance, or sales or in specifc activities—could help.
Senior executives should ensure that cost-cutting eorts refect a company’s strategy. Here are three ways to do so.