88% of Firms Planning Cost Cuts in Next 2 Years

A Deloitte survey finds some cost-cutting is more typical of distressed companies than a 'save to grow' strategy.
Matthew HellerApril 28, 2016
88% of Firms Planning Cost Cuts in Next 2 Years

A large number of U.S. companies that are experiencing growth are also making moves to cut costs that are more typical of businesses in distress, according to a new Deloitte survey.

The poll of 210 senior executives at Fortune 1000 companies found that 88% percent of respondents expect to pursue cost reductions over the next 24 months, regardless of company performance, a more than 10% percent increase from the last report.

Respondents cited the global economy as their top concern, from lower international consumer demand to foreign exchange volatility.

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“The ‘save to grow’ strategy that emerged in our previous survey (using cost reduction to fund growth initiatives) remains prominent,” Deloitte said.

But the consulting firm also said that strategy is being “accompanied by actions not seen since the 2008 global recession, including focusing on balance sheet issues such as working capital, treasury, credit, and cash flow. These cost actions are more typically seen in ‘distressed’ companies and are not traditionally associated with a ‘save to grow’ mentality.”

In another sign of a defensive mentality, 59% of companies are now trying to reduce costs by 10% percent or more. But almost two-thirds of company cost reduction initiatives are not meeting targets, according to Deloitte, and the percentage of cost programs that failed to meet their targets over the past two years has increased from 48% in the 2013 survey to 58% this year.

“Companies are using tactical cost reduction strategies, such as streamlining business processes and reducing external spend, rather than more strategic cost reduction approaches, such as increasing centralization, outsourcing, and offshoring,” the report said.