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Tips from the Experts on Company Cost Cutting.

Whether it’s your household, department or an entire company, making cuts to your budget is never easy. Knowing that reductions must be made and achieving them are two entirely different matters,  but with a few tips from a consulting firm, this tough job sometimes can be made less painful and more productive.

Pat LaPointe, managing partner of MarketingNPV, a marketing investments consulting firm, says planning for the future while making present-day cuts can help companies maintain their profits and customer base, even during austere economic times.

Department heads must first identify the cuts requested by the CEO and then conduct a review of the options, without letting preconceived notions get in the way. After those first steps are taken, LaPointe says managers should consider making cuts that will help improve the company’s overall competitiveness.

“Think about the relative value/importance of customer segments; product groups; channels; or even geographic regions,” he says. “Consider the marginal returns of a dollar spent in each one. Cut ruthlessly from the bottom of the importance rankings.”

Forced financial reductions can bring out the worst in employees who are used to watching out for their own turf. This is the worst time, says LaPointe, to be thinking of only your own team or department. Being inclusive is the best way to garner company-wide support for the proposed cuts, he says.

“By making all your assumptions transparent and testing their credibility with others who are key stakeholders in the company’s future, you ensure that you get their buy-in before you formally recommend a course of action,” explains the consultant.

Employing that method not only saves time, but increases the chance that the action plan will be approved. Although every department, region or team should be assessed while a reduction plan is being considered, LaPointe recommends against making every department absorb an equal cut, saying the measure rewards those who haven’t worked as hard as top-notch employees.

“It’s unfair to the departments that are performing more effectively to starve them of resources in favor of others who are not generating the same level of return to the company,” he says.

However, managers should not think that certain areas are untouchable. Reducing or eliminating mileage or travel reimbursement is a good start, but those line items can only stretch so far, especially if large-scale cuts are required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

MarketingNPV is a specialty consulting firm exclusively focused on measuring and improving the financial return from marketing investments. Pat LaPointe is the author of “Marketing by the Dashboard Light: How to Get More Insight, Foresight, and Accountability from Your Marketing Investments.”

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