“Cut Your Company’s Fat but Keep Some Slack”

When it comes to maximizing profits, companies reflexively focus on cutting expenses at least as much as maximizing revenues. That's because it's easy to understand and quantify.

However, as Professors Sendhil Mullainathan of Harvard and Eldar Shafir of Princeton explain in a Spring 2014 Strategy+Business article called "Cut Your Company's Fat but Keep Some Slack," the consequences are often misunderstood and ultimately lead to stagnant or declining profits.

Consider the example of St. John's Regional Health Center, an .....