Financial Directions - Corporates adopt cost-cutting tools

Companies are increasingly reliant on management tools such as benchmarking and customer relationship management to help them cut costs and improve productivity, according to Management Tools and Trends, a survey conducted by management consultancy Bain & Co, writes Tom Berry.

The survey of over 700 executives from more than 60 countries finds that the use of management tools has jumped 60% since 2000, as executives try to squeeze costs and improve productivity in difficult market conditions.

Fewer than half the respondents see any short-term improvement in economic conditions within their industry and 65% say they are concerned about how they will meet growth targets ? even though almost 60% claim to be focusing on revenue growth as a key driver of business in 2003.

Bain argues that businesses are currently unable to pass on price increases to customers, and so management tools and technology are the only way businesses can improve productivity. And over 68% of respondents cite innovation as a more important driver of long-term growth than price.

According to respondents, the management tools most widely used by businesses in 2002 were strategic planning (89%), mission and value statements (84%) and benchmarking (84%). The tools least used were those requiring large cash outlays, such creating merger and integration teams (37%), corporate venturing (32%) and stock buy-backs (18%).

On average, businesses used 16 management tools in 2002, compared with only 10 in 2000.Companies were most satisfied with tools that help provide internal and external focus, such as codes of ethics and strategic planning. Corporate venturing, downsizing and knowledge management tools had the lowest satisfaction rates.

Tools seeing the biggest increase in utilisation over the period are customer relationship management (78% of respondents, compared with 35% in 2000) and knowledge management (62% in 2002, compared with 28% in 2000).

Usage rates of tools differ by geographic region. Customer segmentation is used by 92% of respondents from Asian companies, but only 70% in North America. Only 69% of European companies employ a code of ethics, compared with 81% in the US. Change management programmes are more widely used in Europe (70%) and Asia (75%) than South America (51%).

The ability to adapt and innovate is viewed differently depending on the size of the company. Only 62% of respondents from large companies (over $2bn turnover) say it delivers significant corporate advantage, compared with 71% of medium-size (between $600m-$2bn turnover) and 78% of small companies (less than $600m turnover).

Large firms are most likely to make staff redundant in 2003 (48%) to improve efficiency, compared with 37% of medium and 22% of small companies.Downsizing and corporate venturing are the only two tools where the number of dissatisfied users outweighed satisfied ones.

For a copy of the survey, email [email protected]