Unlocking Enterprise Savings with Financial Analytics
BACKGROUND
The year was 2008 and the entertainment industry was in turmoil. Planted outside the gates of every film and television studio in Hollywood were workers from the Writers Guild of America striking for better pay. On top of that, the economy was embroiled in the early stages of the deepest recession seen in decades. Disney, buoyed by its recent acquisition of Pixar Animation Studios and a resurgence in its own film and television properties, was breaking records at the box office. However, earnings across the enterprise were sluggish due to the broader macroeconomic headwinds.
THE CHALLENGE
How can Disney create greater operational leverage in an uncertain economic environment?
WHAT WE DID
We started working backwards from Disney’s financials and isolated the company’s largest source of variable expense: its 180,000 worldwide workforce. Analyzing the organizational hierarchies of its seven operating divisions, we discovered that certain organizations were significantly more top-heavy with executive management than others. The analysis ultimately laid the groupwork for an enterprise-wide reorganization of its management structure to optimize and eliminate redundancies.
WHAT WE ACHIEVED
The study served as a catalyst for enterprise cost-cutting measures that gave the company substantial operational leverage in an already uncertain business climate. In total, the company announced plans to save over $500 million in organizational restructuring-related expenses over a 5-year period. Within the company’s largest division alone, Theme Parks & Resorts, 600 executives were offered buyout packages (publicly announced on 2/18/09). Disney’s already strong revenue foundation, combined with a new operating model to temper costs, paved the way for a decade of robust stock gains.