An investigation on the effectiveness of cost cutting techniques on financial performance of an organization: A case of Clarion Insurance Company

Abstract

The research was prompted by the continuous increasing costs and decreasing profits of Clarion Insurance Company, a short term insurance company in Zimbabwe. Notwithstanding the fact the company had made efforts to curb costs since 2016, its profits and generally financial performance continued to decline. The study was carried out to investigate on the efficacy of cost cutting techniques implemented at Clarion Insurance Company in an attempt to improve the financial performance of an organization. The researcher therefore sought to establish and analyse the cost reduction techniques being implemented by Clarion Insurance Company and identify factors which influence the success of these strategies. The study also aimed at establishing the relationship between cost reduction techniques and financial performance of an organisation. Literature from other scholars and authors was reviewed and analysed. The researcher opted for descriptive research design which was effectively coalesced with a qualitative research approach. A systematic sampling technique was employed to identify the 30 respondents to questionnaires and 3 interviews from the management and employees of Clarion Insurance Company. Results indicated that if carefully crafted and implemented, the measures which were employed by the organization, particularly service outsourcing and business process optimization can go a long way in reducing the escalating expenses and improve their cash flow and financial position. Evidence gathered convinced the researcher to recommend that management should move away from reduction of employee benefits and retrenchment where they risk having a hostile working environment and losing experienced personnel. Recommendations were made based on the conclusions