Analysts of the Business Performance Services Group, KPMG in Russia and the CIS, have established that businesses are more inclined in times of uncertainty to save on potential profits (investments in production). Costs are cut to a lesser extent on sales and distribution and product promotion, which account for current profits. Cost reduction projects are driven top-down (from the owners of a business to company management).

Analysis of the opinions of the directors of Russian businesses on how to organize the cost optimization process made it possible to draw the following conclusions:

• There is no corporate cost-reduction plan;
  
• The focus on profits today and not on the long-term;
  
• Cost reduction is the key, rather than optimization of expenses (through improvements in a company's business performance);
  
• The cost optimization process is in general poorly organized, with no clear-cut delegation of responsibility for this process;
  
• The most obvious cost-reduction methods are chosen; no in-depth analysis is performed;
  
• In practice companies fail to achieve the results they had set.
  

Representatives of more than 30 large companies from key Russian business sectors participated in the research. Approximately half the respondents were managers in the finance units of large Russian companies. Most respondents represent companies employing from 100-10,000 staff.

Howard Polinski, Partner, Business Performance Services, KPMG in Russia and the CIS, comments:
"There are significant differences between cost reduction and optimization strategies. Take for example headcount reductions. The most widely practised method is to perform across-the-board staffing cuts as a percentage of headcount. In this case, however, there is the risk of disruption to a company's operating activities; the loss of key employees; increase in costs after a rise in company's production (sales and distribution) figures. It is far more effective to cut headcount costs by setting a target figure for function costs and optimizing all the items incorporated in the cost of this function."