To improve profitability, insurers are shifting their focus from cutting costs to growing their business. To that end, insurers are identifying activities—new and established—that will drive value. At the same time, they continue to slash those costs that do not contribute to their business goals, reinvesting those savings into growth.

Globally, companies in many industries are off to a good start after adopting a comparable strategy. Unfortunately, however, Accenture research shows that a series of roadblocks leaves companies less than fully optimized for growth. The good news is that management has the power to clear their organizations’ path to growth. Accenture identified these obstructions in its report, Increasing agility to fuel growth and competitiveness. The report was based on surveys of 700 executives in 13 industries outside of insurance in nine regions around the world, plus interviews of 65 analysts who follow those industries.

A substantial majority of survey respondents—82 percent—report that they want to free up funds by cutting duplicative costs and costs that do not add value, and funnel them into growth initiatives. Seventy-two percent say their organizations have an enterprise-wide strategy for doing so. But less than one-fourth of the surveyed companies—23 percent—are positioned to optimize and deliver the growth objectives they recognize are critical. Meanwhile, only 36 percent strongly agree their business sustains the benefit of cost reduction programs.

So what is going wrong? There are a few problems.

In this post, we’ll examine one significant problem that we see: executive misalignment, which our research shows is reflected a couple of ways.

Executives say the main desired outcomes driving their cost-management activities are the flexibility to respond to market changes and competitiveness. Yet, even though a large majority say they plan to reinvest savings into growth initiatives, reinvestment ranked last among the top drivers of executives’ cost-management activities.

In addition, we see chief executive officers and chief financial officers have varying viewpoints on where to invest and how to pair cost-savings initiatives with business strategy. For example, slightly more than half of CEOs strongly agree that their organizations both prioritize and allocate resources to only those activities that drive value, but just over one-third of CFOs feel likewise. And 70 percent of CEOs say their organizations formally assess the return on reinvested cost savings, while 49 percent of CFOs say this kind of review occurs.

We also see misalignment between C-level executives and vice presidents. For example, while nearly one-third of C-level executives are confident their organizations can execute on the activities that drive value, only half as many VPs agree. At 25 percent, VPs are less confident than the C-suite—36 percent—that reinvestment priorities are aligned to business strategy. Correspondingly, at 16 percent, VPs are less confident than the C-suite—26 percent—that senior management has the correct cost-reduction initiatives in place.

Next time: Multiple growth initiatives and misaligned operating models.

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