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UPPER MANAGEMENT LACKS A COST-CUTTING STRATEGY; JEOPARDIZES BUSINESS DEVELOPMENT AND GROWTH

 NEW YORK, Nov. 20 ~PRNewswire~ -- Top management puts too great a focus on cutting costs, which sacrifices business development and growth, according to a new study of 338 executives' cost-cutting experiences.
 Kepner-Tregoe, the Princeton-based international consultants, found in the study (released today) that those who undertake a cost-cutting initiative are four times as likely to reduce costs again, yet still don't rate their attempts as successful.
 "Typical cost cutting focuses on head chopping but neglects business development and growth," said Quinn Spitzer, Kepner-Tregoe's president, citing results in which nearly 90 percent of executives surveyed set out to cut costs at least once within the last five years.
 Mr. Spitzer said "The current approach to cost cutting is often undertaken at the expense of the organization's strengths in customer service, research and development, technology and production capability."
 Executives responding to the survey believe that their initiatives have had a minimal impact on their organization's quality and internal systems, Spitzer said. Only half of the executives note improved quality as a result of their cost-cutting efforts. The other half found it had a negative~neutral effect.
 The short-sightedness of focusing solely on costs is confirmed by the executives who have not downsized. When they were asked what distinguished their company from their competitors who are cutting costs, the number one response was "growth"; number two: "focused strategy."
 "This highlights the importance of using a more strategic framework for business planning," according to Mr. Spitzer.
 "Remarkably," said Mr. Spitzer, "few cite efforts to stimulate revenue as a way of catapulting their organizations into profitability and growth.
 "Only one in ten executives in our survey say by cutting costs they are responding to changing markets or customer expectations -- a one- dimensional focus."
 Executives' biggest fear is that cost cutting will have long-term consequences on employee morale. However when asked how they would handle cost cutting differently, few could mention actions to reduce the negative effects.
 Sptizer explains, "Companies leaving major operating systems unchanged allows for 'creepback' in costs. Unless executives understand the principles behind cost management they will continue to struggle with problems that won't end with the recession -- recurring costs and demoralized workers."
 All survey interviews were with CEO's, presidents, vice presidents of operations~manufacturing and plant managers in North America.
 -0- 11~20~92 R
 ~NOTE TO EDITOR: Full study and interviews available~
 ~CONTACT: Judith Carrington or Catherine Barriger of Carrington Associates, 212-534-1100, or night, 212-289-6393, for Kepner-Tregoe~


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TM-OS -- NYFNS1R -- 3458 11~20~92 15:01 EST
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Date:Nov 20, 1992
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