The role of the CFO in cost reduction
Many CFOs are helping their companies achieve significant and sustainable cost reductions - are you leading your business through the downturn?
In a very short time, the CFO's agenda has inverted from control at all costs to absolute cost control. The celebrations following the achievement of statutory and regulatory compliance, SOx sign off, or Basel II compliance are a faded memory now that the pressing issue of business survival is at hand.
Many have described the role of finance as helping the business to understand the financial implications of operational decisions. This is certainly true, but now there is a new perspective: helping business to understand the operational decisions required to improve its financial position.
Undoubtedly, CFOs should take a leading role in re-positioning the business's finances. So how can the CFO, as a functional leader, and indeed the finance function as a whole, provide the compass from which companies will navigate to a more profitable future?
Five lines of attack are key:
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Earn the mandate to lead by demonstrating competence: Leading from a
position of strength requires having, or building, a reputation for the finance
function as a great service and at low cost - in the current environment, the
focus is on information.
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Develop a plan: Assess the value as well as the cost to the business
of all operational and support activity. Manage the realisation of any
programme returns or benefits achieved.
-
Address the short term fixes decisively: Review quickly those costs
inherent in the business that can be rapidly addressed without compromising
value.
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Tackle complexity: Long term sustainable cost reduction is achieved
by eliminating unnecessary complexity that adds cost but no value.
- Communicate: Ensure that actions taken are understood, supported and sustainable.
To find out more, read 'Leader or follower? - The role of the CFO in cost reduction'.
