Published by:
Harvard Business Publishing
Length: 10 pages
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Abstract
Overhead value analysis identifies structural cuts that will reduce overhead costs by 15% to 30%. Overhead value analysis requires delegating to every manager in the company, plus a small, high-level task force, the responsibility to cut overhead costs. The target should be a 40% reduction in costs. This program may have the undesirable side effects of hurting employee morale and of terminating a disproportionate share of minority employees. A company should apply the program when it has an acute short-term need to improve profits, or badly needs to gain a competitive edge by improving its economic structure.
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Abstract
Overhead value analysis identifies structural cuts that will reduce overhead costs by 15% to 30%. Overhead value analysis requires delegating to every manager in the company, plus a small, high-level task force, the responsibility to cut overhead costs. The target should be a 40% reduction in costs. This program may have the undesirable side effects of hurting employee morale and of terminating a disproportionate share of minority employees. A company should apply the program when it has an acute short-term need to improve profits, or badly needs to gain a competitive edge by improving its economic structure.