Managers should not cut costs to boost profits, award-winning academic warns

An academic has been given the top prize at a prestigious awards ceremony for an article advising managers not to cut costs when running a business.

Dr Jules Goddard, 70, a fellow at the London Business School, Regent’s Park, wrote that raising rather than cutting costs can often be the most beneficial and profitable option for UK businesses in his winning article, The Fatal Bias.

He was crowned overall winner at the Management Articles of the Year awards, hosted by the Chartered Management Institute, a body that awards management and leadership qualifications, earlier this month.

Dr Goddard, who lives off Cromwell Avenue, Highgate, said: “It was a nice surprise. As an academic, you publish a lot of work and you can go for years without any recognition. So it is quite nice when something like this does come along once in a blue moon.”

In his article, Dr Goddard argued that it is just as likely that a company will profit from investing in its business than from cutting costs. In spite of this, he said that managers will often reduce spending in an unsuccessful attempt to boost profits and plug financial deficit.


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Dr Goddard thinks it is not only businesses that suffer from this “fatal bias” but also the British economy.

“The fatal bias is to cut costs, but actually, cost, if you think about it, is just a probability,” Dr Goddard said. “Costs can just as easily be too low as too high. All I’m suggesting is that the assumption that costs are too high is a flawed assumption and it’s doing huge harm to the British economy.”

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Dr Goddard advised manufacturers not to cut corners because Britain is unable to compete with developing countries like China, who can make products much more cheaply and quickly.

He pointed to manufacturing giants Dyson and Rolls Royce as examples of businesses who became global success stories by investing large amounts of money in their companies, rather than reducing costs.

To download the articles or find out more about the competition, visit managers.org.uk/articlesoftheyear.

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