Making Smarter Cost Reduction Savings Reinvestment Decisions

Working through the difficult economic environment of recent years, most companies have engaged in varying degrees of cost reduction strategies to either simply ensure their survival or to free up sufficient liquid assets for future reinvestment in company growth. Following several years of these cost reduction programs and an improving economy, many companies are now in a position to begin making those reinvestments.

However, according to a recent article in CFO Magazine, reinvestments have been slow to come largely as a result of disconnected priorities and differing levels of ROI understanding between the CEO and CFO. The article cites a study conducted on the topic which found that while slightly more than half of CEOs believe their priorities for reinvesting savings from cost reduction efforts were aligned with overall business strategies, only 34% of CFOs said the same.

When asked about ROI review processes, the chief executives and finance chiefs were even further apart with fewer than half of CFOs believing they used formal reviews of investment success to assess ROI compared to 70% of CEOs.

What this disconnect seems to suggest more than anything is that many companies are not properly equipped to confidently assess which areas are most worthy of additional investments given uncertain ROI. The top challenge listed by companies who participated in the previously cited survey was “Identifying the right areas to invest” followed closely by “Analytic insights to make more informed decisions”. In all, nearly half of all respondents cited their top concern to relate in some way to clearly seeing or measuring the impact of such an investment.

The solution to this ‘paralysis by analysis’ is the implementation of a solution that can empower executives and managers at every level of a company to identify and measure the areas of their business that are returning value. For more than 30 years, Salient Management Company has been empowering managers and companies with the insights they need to make better, more informed decisions like this. By bringing all relevant data into a single source for analysis, managers can truly visualize where additional investments could make the biggest impact and, possibly even more important, where investment would be wasted.

To learn more about how Salient can help bring clarity to complex problems, visit our website or contact us today.

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