Shanghai, June 20, 2013—Leading global management consulting firm Booz & Company today announced the results of the 2013 Fit for Growth Index study, which finds sustainable company performance is driven by the extent to which corporations are able to link their strategic and cost agendas.
“Since the 2008 economic crisis, when many firms had to slash costs in a rush, executives have been increasingly pressured to determine how to best reposition their companies for growth and economic recovery. Many companies are sitting on healthy balance sheets, but few are really clear about how to make the most of their financial resources,” said Vinay Couto, Booz & Company senior partner and coauthor of the study.
Booz and Company’s Fit for Growth* approach is a proven way forward for companies that want to cut costs and grow stronger. The Fit for Growth Index measures how well a company connects its cost and growth agendas by assessing companies in three key areas: strategic clarity and coherence with a clear and aligned set of capabilities; aligned resource base and cost structure; and supportive organization. The study analyzed nearly 200 public companies across a wide range of industries. Each company’s index score was calculated and compared with its total shareholder return over the past two years.
- There is a clear correlation between a company’s Fit for Growth Index score and its market performance. Companies that focus on the three key elements of strategic clarity and coherence, resource alignment, and supportive organization generate higher shareholder returns.
- Although the steps may seem clear and the positive impact is obvious, less than one-fifth of the companies (17 percent) are well positioned to grow. Only a small subset of those (6 percent of the total) perform well along all three dimensions of the Fit for Growth Index.
- Companies fall into five broad “archetypes,” each with its own characteristics and challenges. The study identifies a specific set of recommendations for companies in each archetype.
- Companies with the highest Fit for Growth Index score tightly link their strategic and cost agendas while building supportive organizations. They clearly understand which capabilities are truly critical for winning with their strategy, and they funnel the bulk of their resources to those differentiating capabilities. Finally, they strive to build supportive organizations so that the collective actions of their people align more closely to their strategy.
“Having worked with many leading companies across a variety of industries, we have the unique opportunity to gain insights into what winning organizations do to return to sustainable high performance,” said Booz & Company partner and study coauthor Ashok Divakaran. “The Fit for Growth Index provides a measurable, quantifiable metric that assesses the benefits of how a company can build competitive muscle while cutting the corporate fat that weighs the company down.”
“Few companies would disagree that robust strategies, solid cost management, and powerful organizations are critical to performance. But they may not be aware of how much these three elements need to reinforce one another,” added John Jullens, Booz & Company partner. “Combining them is the hard part: Our research shows that few companies are masters in integrating all three elements. Making improvements requires a dispassionate clear-headedness about one’s strengths and weaknesses, an understanding of where the links between strategy, resource management, and organization are broken, and the development of a clear plan of attack to reap the benefits.”
More information about Fit for Growth, including the full study report and other supporting materials, can be found at www.strategyand.pwc.com/ffg.
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