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Hello John, I asked this question few days ago but still stuck in it.
Which TWO of the following statements about cost reduction are true?
Cost reduction improves employee motivationCost reduction happens automatically
Cutting costs in the short term may increase costs in the longer term
Cost reduction measures include crash programmes and planned cost reduction campaigns
Statement 3 and Statement 4 are correct.
In Kaplan, it clearly states that Cost reduction attract employees as they see that organisation is deligently working on customer’s demand. And many cost reduction plans make each department manager think for cost reduction. Their ideas are rejected if wrong so how statement 1 is incorrect?I cannot comment on what Kaplan might have written without seeing the context.
However cost reduction does not necessarily improve staff motivation. Cost can be reduced by sacking some of the staff or by making staff work harder – neither of these will be motivating for staff.
If staff are offered bonus’s for cutting costs then this may well motivate them to cut costs, but that is not what the statement in the question is saying.
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