As the second quarter “earnings season” has played out over the last several weeks, I think it is fair to say that more often than not “numbers” were made despite drops in revenue. The explanation for this is again, more often than not, that the company has “cut costs.” Does this mean there are no more costs to cut? Does it mean the job was done well and all organizations are now better cost managers? Experience tells us the answer to both questions is “probably not.”

In the March 2009 issue of Finance & Management, a monthly publication of the Finance and Management faculty of the Institute of Chartered Accountants of England and Wales (www.icaew.com), there is an article titled “The Intelligent Way to Cut Costs.” The author outlines “10 Keys to Strong Cost Leadership”:

• A challenging base case;

• Individual accountability;

• Persistence;

• A continuous improvement culture;

• Short time frames;

• Feedback loops;

• A strategic skepticism;

• A strong top team — finance;

• A strong top team — HR; and

• Good role models.

I have been exploring continuous controls monitoring (CCM) over the last few months, and it has struck me how CCM can really be a key part of effective cost leadership in any organization. In particular, CCM can help in four areas noted above:

1. Persistence: As the article’s author points out, “The key to successful cost-cutting is annoyingly simple — persistence.” It seems to me that the purpose of CCM is to be “annoyingly persistent” in that it is in constant contact with your transactions, looking for things that may be out of whack … and it reminds you to follow up when set up properly.

2. A continuous improvement culture: CCM well done won’t let you get complacent … it will be constantly looking at your business flow and highlighting things that should be addressed before they get out of hand.

3. Short time frames: Here again, CCM can keep you focused on results now … not a few months later, when you decide it is time for a seek-and-destroy mission.

4. Feedback loops: As the author highlights, feedback loops need to supply good data, be timely, and have visibility and transparency. And, of course, one of the prime focuses of CCM is providing feedback!

As they like to say in the UK, “at the end of the day,” these two ideas — cost-cutting (or cost leadership or cost management … call it what you will) and CCM — seem to provide an interesting opportunity to pair good management and good technology. ###