Managing for Improved Corporate Performance

Today, consumers have power in most industries. Price transparency, industry overcapacity in most sectors and ruthless price competition have all contributed to put consumers on top and punched a hole in profits for companies. In such an environment, companies have put the brake on spending and turned the screws on their organizations to extract more value from existing investments. Those screws however, will soon run into a hard wall -- there's only so much fat that can be cut. It's not perpetual, and the investments that have been ignored can only be put off for so long. McKinsey labels this as "the risk of reckless conservatism." The instinctive reaction of retreating to core businesses "is not a practical strategy when the core itself is under attack." The drive to just "make-budget" is putting their core at risk, as there is little investment in maintenance, and the cost will be to future revenue. This at a time when companies face a hypercompetitive environment, with rapid changes that requires agility. Instead of compromising long term investments, companies need to embrace them -- and manage them. Discretionary spending should not be cut in lean times, but treated as a scarce resource -- to be invested wisely and managed carefully. McKinsey encourages companies to adopt corporate performance management processes -- processes that are driven horizontally across the organization to ensure that the right investments are made. Read more in the McKinsey article, "Managing for Improved Corporate Performance."