Fewer than one in three tech leaders call non-core expense management
important; services and resources industries place greater emphasis on
improving cash flow
TORONTO, May 4 /CNW/ - Just 31 percent of senior executives in the
technology industry in North America view non-core expense management as
important, significantly trailing other leaders in the services and
manufacturing industries, according to a comprehensive three-year study
conducted by MGPS, a management consulting firm specializing in expense
The MGPS study, which stemmed from interviews with nearly 150 senior
executives in a broad range of industries from 2005 to 2008, underscores the
gap among leaders in various industries and the attention they place on
non-core expense management. The median company polled had annual revenues of
$464 million and more than 1,400 employees.
Non-core expenses are indirect costs - such as packaging, transportation
and real estate - that are not tied to revenue but can have a marked impact on
a company's cash flow.
In contrast to the low numbers posted by technology executives, 57
percent of senior executives in the services industries consider non-core
expense management to be important, followed by those working in the resources
industry (51 percent) and manufacturing industries (45 percent).
"This study clearly tells us that senior leaders in technology fail to
see the overall importance of improving cash flow," said Philip Moorcroft, CEO
of MGPS and a former senior financial analyst for PricewaterhouseCoopers. "At
a time when some industries are beginning to see the value of non-core expense
management, the tech industry's slower recognition is particularly troubling."
In widespread interviews with executives, Moorcroft discovered that most
cost-cutting measures tended to be confined to non-core areas such as limiting
travel or undertaking cuts such as switching to cheaper coffee brands or
reducing free snacks.
"Executives increasingly view non-core as cutting very basic elements
from a budget, questionable items that very often have very little bearing on
a company's bottom line," added Moorcroft, the primary author of the study.
To underscore the potential cash savings that can result from analyzing
non-core expenses, Moorcroft described how a $1.1 billion oil and gas company
sought help in cutting costs and increasing cash flow. The company had 1,000
employees and a $4.2 billion market cap. After reviewing non-core expenses,
the company was able to save 27 percent in non-core costs alone, totaling
nearly $1 million.
"Those companies that realize that non-core savings leads to greater cash
flow are ultimately in a better financial position for the long term," he
Unfortunately, Moorcroft noted, many executives he meets expect the
economy will eventually improve and that they will not need to pay attention
to non-core expenses.
"There is a growing sense that the economy is improving and that
government assistance will enable organizations to ride out the storm without
having to focus attention on small-ticket items," said Moorcroft. "That is a
very dangerous stance to take in any economic climate."
To view the complete MGPS study, visit www.mgps.com and see the report on
the home page.
MGPS (www.mgps.com) is a management consulting firm that specializes in
reducing non-core expenses at organizations throughout North America. These
expenses, which tend to be overpriced, are indirect and do not generate
revenue. Non-core expenses are typically small and overlooked and are
scattered throughout the organization. However, collectively, non-core
expenses are a significant component of overall organizational costs. MGPS
identifies these costs and reduces overall non-core expenses. The result is
increased cash flow and greater profitability. Visit us at www.mgps.com to
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