A CFO's perspective.

Author:Licata, Anthony
 
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If the economic uncertainty of the past few years has taught us anything, it is that human behavior is hard to change. Tasked with rapidly responding to a shocking drop in the demand for goods and services, CFOs were faced with decisions aimed at preserving short-term profits or stemming losses, while at the same time setting strategy to deal with real-time changes or challenges to our conventional business models.

What did we do? We attacked expenses with unprecedented vigor. Even the most diligent expense-slashing mavens found new energy and a keener eye for cost containment. Despite the turbulence of the past few years, we spent 80 percent of our time addressing the 50 percent of costs that were the easiest to affect. In many ways it reminded me of business school Management 101 classes and executive self-help books urging professionals to tackle the most difficult items on your to-do list first. Easier said than done. It is not the way we are programmed.

If we are going to be honest about real cost savings, we have to admit (at least to ourselves) that there is substantial spend ingrained in every organization that is begging for a fresh look. That spending is protected by politics, red tape or the daunting recognition that the ix will require a lot of hard work to identify and reorganize. In the recent business climate, short term expense actions were the call of the day, but we always knew there were items that would actually produce substantial benefits in the long term that needed to be addressed. When the recession began to materialize, we had an immediate need to show results, and this was our time to shine, so we went after the low-hanging fruit.

The consequences of this exercise easily can lead to an unbalanced organization. Certain business lines or critical infrastructure departments can become too lean in key areas, while others might remain bloated and too top heavy. This asymmetric approach might not meet the needs of the new business model or competitive challenges.

Run through the list of the top vendors at your company--how many of you find professional service organizations at or near the top? Sure, the auditors and consultants on the financial side were addressed in many respects because we control the workflow. But what about other service providers? Have you ever wished you could rip the cover of your legal spend? Any reason you haven't gotten there yet? Do you think you have?

Let me let you in on a secret: You are...

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