)
Companies may be diverting money away from strategically important projects by cutting costs indiscriminately, warns a survey Strategy&, a member of the PwC network of firms. Low-priority initiatives get too much funding, according to Fit for Growth index, a survey of more than 500 companies conducted worldwide. Less than a quarter of executives said budgeting at their company is aligned with strategic planning. Around 66 per cent executives said lower-priority initiatives receive more than their fair share of funding. In fact, about the same percentage (65 per cent ) said there are substantive businesses, products and/or services in their portfolios that are misaligned with the company's overall strategy.
Only a quarter of executives said their companies cut costs based on priorities that are set for the whole organisation. Nearly half of respondents (48 per cent) said their companies cut costs due to external events or outside pressure, not due to their culture of continuous improvement. A quarter of executives said their companies "peanut-butter" cost cuts - defined as everyone giving up a fixed percentage of spending - rather than reducing spending in a more strategic way.
The survey says leaders of companies should take a rigorous review of the capabilities needed and take a dispassionate assessment of where they stand.
