Too many cuts will be fatal
Published 20/10/2010 | 05:00
IRISH business should be careful about cutting too hard during the recession, according to Robert Kaplan, the influential American management consultant and adviser to President Barack Obama.
Mr Kaplan, who was speaking in Dublin yesterday, said the cost-cutting frenzy in many countries was like taking a meat cleaver to oneself to remove some fat. Such drastic action removes muscle and can leave a business so badly damaged that in some cases it may not recover.
"The low-cost, low-price model -- the race to the bottom -- is probably not a strategy that can be sustained, whether in a service economy or the manufacturing sector, because there are always lower cost ways of producing those products and services outside the country. The death spiral starts when you start cutting and then you have to cut some more," he told around 150 people during a half-day seminar.
Executives should instead measure customer profitability, product performance and employee development. Competition will remain strong from countries outside Ireland so local business must create differentiated, better and more unique products and services.
"The question everyone has to ask is: What will the world look like in five years' time?" said Mr Kaplan.