Six Differences that Distinguish Cost Cutting from Cost Reduction | Chris Hohmann

  1. Arbitrary vs. Rational
  2. Reaction vs. analysis
  3. Blanket vs. focused
  4. One shot vs. sustainable
  5. Limited vs. infinite
  6. Quick vs. slow


Michel Baudin‘s comments:

Another insightful article from Chris. I would expand on what he says in point 4, that “it is not unusual to see a surge of expenses afterwards, in order to recover from the negative side effects of arbitrary cost cutting.”

Generally speaking, if you make one dimension of performance better by making others worse, you have not achieved any improvement. If, by cutting costs, you degrade quality and delay deliveries, all you are doing is setting the stage for spending even more down the line to fix the problems you have just created. It’s playing management whack-a-mole.

The only genuine improvements are the changes that result in better quality, faster deliveries, or lower costs without making anything else worse.

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