Factoid Friday – Corporate Cost Cutting Fizzles

Only 10% of cost-reduction programs sustain their results three years on, McKinsey research finds. Sales, general, and administrative (SG&A) costs are particularly unyielding: While manufacturing efficiencies have helped S&P 500 companies reduce the median cost of goods sold (as a percentage of revenues) by about 2.7 percentage points over the past decade, SG&A(sales, general, and administration) costs have remained at about the same level.

source: HBR daily stat

It’s interesting to note that corporate cultures will peak with cost cutting initiatives at 3 years and the initiatives don’t go further than direct operations. When starting a Lean initiative or any other initiative I always ask what are you doing to make sure you going to keep seeing gains? With Lean the driver can come from the top level strategy as well as pursuing efficiency outside of direct operations. HR is a great place to start your Lean transformation. IT is another support group that can benefit greatly form Lean. How does your company deal with sustaining changes? Where do you start your improvements?

If you are interested in knowing how to sustain Lean please contact us.

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