Evaluating cost reduction strategies in Uganda Telecom Limited

Abstract

The purpose of the study was to evaluate the cost reduction strategies in UTL and recommend ways to strengthen the implementation of cost reduction strategies for turning around UTL’s performance. Specific study objectives were to assess the cost reduction strategies, challenges and strengthening the implementation of cost reduction strategies. The study adopted a cross sectional study design adopting both quantitative and qualitative approaches. Data was collected from top and middle management staff of UTL using a questionnaire. It was found that although UTL had explored some strategic cost reduction options related to budgeting, investment decision techniques and downsizing, key strategic cost reduction strategies related to use of Balanced Score Card (BSC) and generation of annual financial report had not been fully exploited by top management. At the operational cost reduction strategies, it was concluded that there were still other critical HR cost reduction avenues notably HR automation and talent retention which had not been exploited. There were still significant avenues for finance and accounts function cost reduction notably enforcement of credit management to avoid delinquency and enforcement of prompt remittance of statutory deductions to avoid statutory liabilities. Under Procurement cost reduction strategies, the company had not considered use of cost-control forum and use of modern inventory management approaches. Moreover, on outsourcing the company had not adequately enforced contractor performance monitoring and reporting and vendor audits in their outsourcing practices. Implementation of cost reduction strategies was constrained mostly by loss of customers, organizational silos, limited management capacity to implement the strategy and rapid obsolescence of information technologies. To enhance implementation of cost reduction strategies, the study recommends strategic interventions demanding that the Managing Director should orchestrate change by setting cost reduction objectives, re-orientating management on the cost reduction implementation and compelling middle managers to include cost reduction performance results in the functional unit’s reports. At the operational level, the study recommends that the human resource department should reconstitute and coordinate the BSC performance management system; top, middle, and lower management of the company should enforce internal control activities at their level by adequately segregating financial duties and tightening physical controls.